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Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 D m Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 rAL-? ZSU~u PRESIDENT'S SPECIAL REVIEW BOARD New Executive Office Building - Room 5221 Washington, D.C. 20506 202-456-2566 JOHN TOWER Chairman EDMUND MUSKIE BRENT SCOWCROFT RHETT DAWSON Director W. CLARK MCFADDEN II General Counsel The Honorable Ronald W. Reagan The President of the United States Washington, D.C. 20500 Dear Mr. President: We respectfully submit to you the Report of the Special Review Board. This Report is the product of our study of the National Security Council, its operation and its staff. For the last three months, we have reviewed the evolution of the NSC system since its creation forty years ago. We had extensive discussions with almost every current and former senior official involved in national security affairs. Case studies from several Administrations were also conducted to inform our judgments. At your direction, we also focused on the Iran/Contra matter and sought to follow your injunction that "all the facts come out." We attempted to do this as fairly as we knew how so that lessons for the future could be learned. The Report is based in large part on information and documentation provided to us by U.S. departments and agencies and interviews of current and former officials. We relied upon others in the Executive Branch to conduct the search for materials or information we requested. In general, we received a positive response to our inquiries from every agency, including the White House, although the Independent Counsel and the Federal Bureau of Investigation responded negatively to our request for material. We found that the individuals from agencies that appeared before us generally did so in a forthcoming manner. The portions of this Report that recite facts were reviewed by appropriate agency representatives in order to identify classified material. This was done to enable you to make the Report public. These representatives performed this security Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 review without regard for domestic political consequences. No material was deleted on the grounds that it might prove embarrassing to your Administration. There was, however, some information that we concluded had to remain in the classified domain. The appropriate Congressional committees may find this information of use. While the publication of the material in this Report may be troublesome to some in the short term, we believe that, over time, the nation will clearly benefit by your decision to commission this review. We commend this Report to you and to future Presidents in the hope that it will enhance the effectiveness of the National Security Council. We are honored to have had the opportunity to serve on this Board. Sincerely, Edmund S. Muskie John Tower J Brent Scowcroft Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Table of Contents Part I Introduction ........................................................................................................ I-1 Part 11 Organizing for National Security ....................................................................... II-1 A. The National Security Council ................................................................... II-1 B. The Assistant to the President for National Security Affairs .................... 11-2 C. The NSC Staff ............................................................................................ 11-3 D. The Interagency Committee System ......................................................... 11-4 E. The Reagan Model ..................................................................................... 11-5 F. The Problem of Covert Operations ........................................................... 11-5 Part III Arms Transfers to Iran, Diversion, and Support for the Contras .................... III-1 Section A: The Arms Transfers to Iran ......................................................... 111-2 Stage 1: The NSC Staff Seeks a New Look at U.S. Policy on Iran ............ 111-2 Stage 2: The NSC Staff Tries a Second Time ............................................ 111-3 Stage 3: The Israelis Provide a Vehicle ...................................................... 111-4 Stage 4: The Initiative Appears to Founder ............................................... 111-8 Stage 5: The United States Sells Directly to Iran ....................................... 111-10 Stage 6: The NSC Staff Manages the Operation ........................................ 111-13 Stage 7: The Second Channel Is Opened But the Initiative Leaks ........... 111-17 Section B: Contra Diversion ........................................................................... 111-19 Section C: The NSC Staff and Support for the Contras ............................... 111-21 Part IV What Was Wrong ............................................................................................... IV-1 A. A Flawed Process ....................................................................................... IV-1 B. Failure of Responsibility ............................................................................ IV-10 C. The Role of the Israelis ............................................................................. IV-12 D. Aftermath-The Efforts To Tell the Story ............................................... IV-12 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Part V Recommendations .............................................................................................. V-1 Principal Recommendation ............................................................................ V-4 Specific Recommendations ............................................................................. V4 Appendix A Executive Order 12575 ...................................................................................... A-1 Appendix B The Iran/Contra Affair: A Narrative .................................................................. B-1 1. Background .................................................................................................. B-1 A. Intellectual Threads in the NSC Staff: 1984 .......................................... B-2 B. Further 1984 Threads: Iran, Weapons, and Hostages .......................... B-3 II. NSC Staff Diplomacy and Thinking: January-July 1985 ........................... B-4 A. The NSC Staff in Action ........................................................................ B-4 B. Intellectual Formulations: The NSC and Intelligence Estimates .......... B-6 C. Events Keep the NSC's Ideas Alive: January-June 1985 ....................... B-11 D. NSC Staff Activity: May July 1985 ..................................................:...... B-12 III. The President, His Staff, and the Cabinet: July-August 1985 ................. B-14 A. The Principals' Various Views: August 1985 ......................................... B-19 B. Post Mortem ........................................................................................... B-23 IV. The NSC Staff, Arms, Hostages, and Finances ........................................ B-25 A: The First Shipment of TOW Missiles: August-September 1985........... B-25 B. Financing the Transaction ...................................................................... B-28 V. United States Involvement Takes a New Form: October 1985 January 1986 ......................................................................................................... B-28 A. Prelude to the Israeli Shipment of Hawk Missiles ................................. B-28 B. The Shipment of HAWKs: November 1985 .......................................... B-31 C. North's Plan to Free the Hostages ......................................................... B-34 D. The President and His Advisors ............................................................ B-37 E. The First Draft of a "Finding": November 1985 ................................... B-38 F. December 1985: Bird's Eye View ........................................................... B-40 F. The NSC Staff, the CIA, and Ghorbanifar: December 1985 January 1986 ...................................................................................................... B-52 G. The January 1986 Findings .................................................................... B-57 VI. The United States Sells Iran 1,000 TOW Missiles .................................. B-67 A. Launching "Operation Recovery " B-70 B. Forward ................................................................................................... B-73 VII. Hostages and Iran Pursued: March-May 1986 ....................................... B-79 A. Prologue to a McFarlane-Iranian Meeting, I: March 1986 .................... B-80 B. Prologue to a McFarlane-Iranian Meeting, II: April-May 1986 ............. B-85 C. Excursions: May 1986 ............................................................................. B-95 D. Tehran: May 25-28, 1986 ...................................................................... B-96 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 E. Post Mortem ............................................................................................ B-119 VIII. The End of the Beginning: June July 1986 ........................................... B-121 A. Aid to the Nicaraguan Resistance .......................................................... B-121 B. Hostages and Iran, June July 1986: "Stalemate" .................................. B-127 C. Jenco ....................................................................................................... B-138 IX. New Wine in Old Bottles? July-November 1986 ..................................... B-147 A. Sequentialism .......................................................................................... B-147 B. The Second Channel in Washington ..................................................... B-157 C. Frankfurt ................................................................................................. B-160 D. Arms Into Iran, One Hostage Out of Lebanon ..................................... B-167 Charts and Narratives .................................................................................... B-173 Appendix C The NSC Staff and the Contras .......................................................................... C-1 The NSC Staff Steps Into the Void ............................................................... C-2 1. North's Operational Role: September, 1984-October, 1985 ................. C-2 2. Private Funding: January-April, 1985 ..................................................... C-4 Congressional Reactions ................................................................................ C-6 Authorization for "Communications" and "Advice" ................................ C-6 Direct Involvement in Resupply: Fall 1985-Summer 1986 ........................... C-7 Concern for Disclosure ................................................................................... C-10 Summer 1986: Project Democracy ................................................................ C-11 Who Knew What? .......................................................................................... C-14 Appendix D Aftermath-The Efforts To Tell the Story ........................................................ D-1 The NSC Staff Tried To Build the Story ....................................................... D-1 Mr. McFarlane and the NSC Chronologies .................................................... D-3 The White House Position Changed .............................................................. D-11 The President's Address to the Nation .......................................................... D-12 VADM Poindexter Briefed Reporters ............................................................ D-12 The President's News Conference .................................................................. D-13 Appendix E Case Studies Prepared for the Board ................................................................ E-1 Appendix F President's Special Review Board Interviews .................................................... F-1 Appendix G Correspondence Regarding the Appearance of VADM Poindexter and LtCol North Before the Board .............................................................................. G-1 Appendix H Letter from Attorney General Meese Regarding Requirements of the Hughes- Ryan Amendment ....................................................................................... H-1 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Introduction In November, 1986, it was disclosed that the United States had, in August, 1985, and subse- quently, participated in secret dealings with Iran involving the sale of military equipment. There appeared to be a linkage between these dealings and efforts to obtain the release of U.S. citizens held hostage in Lebanon by ter- rorists believed to be closely associated with the Iranian regime. After the initial story broke, the Attorney General announced that proceeds from the arms transfers may have been divert- ed to assist U.S.-backed rebel forces in Nicara- gua, known as Contras. This possibility en- larged the controversy and added questions not only of policy and propriety but also violations of law. These disclosures became the focus of sub- stantial public attention. The secret arms trans- fers appeared to run directly counter to de- clared U.S. policies. The United States had an- nounced a policy of neutrality in the six-year old Iran/Iraq war and had proclaimed an em- bargo on arms sales to Iran. It had worked ac- tively to isolate Iran and other regimes known to give aid and comfort to terrorists. It had de- clared that it would not pay ransom to hostage- takers. Public concern was not limited to. the issues of policy, however. Questions arose as to the propriety of certain actions taken by the Na- tional Security Council staff and the manner in which the decision to transfer arms to Iran had been made. Congress was never informed. A variety of intermediaries, both private and gov- ernmental, some with motives open to ques- tion, had central roles. The NSC staff rather than the CIA seemed to be running the oper- ation. The President appeared to be unaware of key elements of the operation. The contro- versy threatened a crisis of confidence in the manner in which national security decisions are made and the role played by the NSC staff. It was this latter set of concerns that prompt- ed the President to establish this Special Review Board on December 1, 1986. The Presi- dent directed the Board to examine the proper role of the National Security Council staff in national security operations, including the arms transfers to Iran. The President made clear that he wanted "all the facts to come out." The Board was not, however, called upon to assess individual culpability or be the final arbi- ter of the facts. These tasks have been properly left to others. Indeed, the short deadline set by the President for completion of the Board's work and its limited resources precluded a sep- arate and thorough field investigation. Instead, the Board has examined the events surround- ing the transfer of arms to Iran as a principal case study in evaluating the operation of the National Security Council in general and the role of the NSC staff in particular. The President gave the Board a broad char- ter. It was directed to conduct "a comprehen- sive study of the future role and procedures of the National Security Council (NSC) staff in the development, coordination, oversight, and con- duct of foreign and national security policy."' It has been forty years since the enactment of the National Security Act of 1947 and the cre- ation of the National Security Council. Since that time the NSC staff has grown in impor- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 tance and the Assistant to the President for Na- tional Security Affairs has emerged as a key player in national security decision-making. This is the first Presidential Commission to have as its sole responsibility a comprehensive review of how these institutions have per- formed. We believe that, quite aside from the circumstances which brought about the Board's creation, such a review was overdue. The Board divided its work into three major inquiries: the circumstances surrounding the Iran/Contra matter, other case studies that might reveal strengths and weaknesses in the operation of the National Security Council system under stress, and the manner in which that system has served eight different Presi- dents since its inception in 1947. At Appendix B is a narrative of the informa- tion obtained from documents and interviews regarding the arms sales to Iran. The narrative is necessarily incomplete. As of the date of this report, some key witnesses had refused to testi- fy before any forum. Important documents lo- cated in other countries had yet to be released, and important witnesses in other countries were not available. But the appended narrative tells much of the story. Although more infor- mation will undoubtedly come to light, the record thus far developed provides a sufficient basis for evaluating the process by which these events came about. During the Board's work, it received evi- dence concerning the role of the NSC staff in support of the Contras during the period that such support was either barred or restricted by Congress. The Board had neither the time nor the resources to make a systematic inquiry into this area. Notwithstanding, substantial evidence came before the Board. A narrative of that evi- dence is contained at Appendix C. The Board found that the issues raised by the Iran/Contra matter are in most instances not new. Every Administration has faced similar issues, although arising in different factual con- texts. The Board examined in some detail the performance of the National Security Council system in 12 different crises dating back to the Truman Administration.2 Former government officials participating in many of these crises were interviewed. This learning provided a broad historical perspective to the issues before the Board. Those who expect from us a radical prescrip- tion for wholesale change may be disappointed. Not all major problems-and Iran/Contra has been a. major one-can be solved simply by re- arranging organizational blocks or passing new laws. In addition, it is important to emphasize that the President is responsible for the national se- curity policy of the United States. In the devel- opment and execution of that policy, the Presi- dent is the decision-maker. He is not obliged to consult with or seek approval from anyone in the Executive Branch. The structure and proce- dures of the National Security Council system should be designed to give the President every assistance in discharging these heavy responsi- bilities. It is not possible to make a system immune from error without paralyzing its ca- pacity to act. At its senior levels, the National Security Council is primarily the interaction of people. We have examined with care its operation in the Iran/Contra matter and have set out in considerable detail mistakes of omission, com- mission, judgment, and perspective. We believe that this record and analysis can warn future Presidents, members of the National Security Council, and National Security Advisors of the potential pitfalls they face even when they are operating with what they consider the best of motives. We would hope that this record would be carefully read and its lessons fully absorbed by all aspirants to senior positions in the Na- tional Security Council system. This report will serve another purpose. In preparing it, we contacted every living past President, three former Vice Presidents, and every living Secretary of State, Secretary of De- fense, National Security Advisor, most Direc- tors of Central Intelligence, and several Chair- men of the Joint Chiefs of Staff to solicit their views. We sought to learn how well, in their ex- perience, the system had operated or, in the case of past Presidents, how well it served them. We asked all former participants how Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 they would change the system to make it more useful to the President.3 Our review validates the current National Se- curity Council system. That system has been utilized by different Presidents in very different ways, in accordance with their individual work habits and philosophical predilections. On oc- casion over the years it has functioned with real brilliance; at other times serious mistakes have been made. The problems we examined in the case of Iran/Contra caused us deep concern. But their solution does not lie in revamping the National Security Council system. 9 A list of the witnesses interviewed by the Board is contained in Appendix F. That system is properly the President's crea- ture. It must be left flexible to be molded by the President into the form most useful to him. Otherwise it will become either an obstacle to the President, and a source of frustration; or an institutional irrelevance, as the President fash- ions informal structures more to his liking. Having said that, there are certain functions which need to be performed in some way for any President. What we have tried to do is to distill from the wisdom of those who have par- ticipated in the National Security Council system over the past forty years the essence of these functions and the manner in which that system can be operated so as to minimize the likelihood of major error without destroying the creative impulses of the President. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Organizing for National Security Ours is a government of checks and balances, of shared power and responsibility. The Consti- tution places the President and the Congress in dynamic tension. They both cooperate and compete in the making of national policy. National security is no exception. The Con- stitution gives both the President and the Con- gress an important role. The Congress is criti- cal in formulating national policies and in mar- shalling the resources to carry them out. But those resources-the nation's military person- nel, its diplomats, its intelligence capability- are lodged in the Executive Branch. As Chief Executive and Commander-in-Chief, and with broad authority in the area of foreign affairs, it is the President who is empowered to act for the nation and protect its interests. A. The National Security Council The present organization of the Executive Branch for national security matters was estab- lished by the National Security Act of 1947. That Act created the National Security Council. As now constituted, its statutory members are the President, Vice President, Secretary of State, and Secretary of Defense. The President is the head of the National Security Council. Presidents have from time to time invited the heads of other departments or agencies to attend National Security Council meetings or to participate as de facto members. These have in- cluded the Director of Central Intelligence (the "DCI") and the Chairman of the Joint Chiefs of Staff (the "CJCS"). The President (or, in his absence, his designee) presides. The National Security Council deals with the most vital issues in the nation's national securi- ty policy.. It is this body that discusses recent developments in arms control and the Strategic Defense Initiative; that discussed whether or not to bomb the Cambodia mainland after the Mayaguez was captured; that debated the time- table for the U.S. withdrawal from Vietnam; and that considered the risky and daring at- tempt to rescue U.S. hostages in Iran in 1980. The National Security Council deals with issues that are difficult, complex, and often secret. Decisions are often required in hours rather than weeks. Advice must be given under great stress and with imperfect information. The National Security Council is not a deci- sion-making body. Although its other members hold official positions in the Government, when meeting as the National Security Council they sit as advisors to the President. This is clear from the language of the 1947 Act: "The function of the Council shall be to advise the President with respect to the integration of domestic, foreign, and military policies relating to the na- tional security so as to enable the mili- tary services and the other depart- ments and agencies of the Govern- ment to cooperate more effectively in matters involving the national securi- ty. The National Security Council has from its inception been a highly personal instrument. Every President has turned for advice to those individuals and institutions whose judgment he has valued and trusted. For some Presidents, Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 such as President Eisenhower, the. National Se- curity Council served as a primary forum for obtaining advice on national security matters. Other Presidents, such as President Kennedy, relied on more informal groupings of advisors, often including some but not all of the Council members. One official summarized the way the system has been adjusted by different Presidents: "The NSC is going to be pretty well what a President wants it to be and what he deter- mines it should be. Kennedy-and these are some exaggerations and generalities of course-with an anti-organizational bias, disestablished all [the Eisenhower created] committees and put a tight group in the White House totally attuned to his philo- sophic approach * * *. Johnson didn't change that very much, except certain diffi- culties began to develop in the informality which was [otherwise] characterized by speed, unity of purpose, precision * * *. So it had great efficiency and responsive- ness. The difficulties began to develop in * * * the informality of the thing." The Nixon Administration saw a return to the use of the National Security Council as a principal forum for national security advice. This pattern was continued by President Ford and President Carter, and in large measure by President Reagan. Regardless of the frequency of its use, the NSC has remained a strictly advisory body. Each President has kept the burden of decision for himself, in accordance with his Constitu- tional responsibilities. B. The Assistant to the President for National Security Affairs Although closely associated with the National Security Council in the public mind, the Assist- ant to the President for National Security Affairs is not one of its members. Indeed, no mention of this position is made in the Nation- al Security Act of 1947. The position was created by President Eisen- hower in 1953. Although its precise title has varied, the position has come to be known (somewhat misleadingly) as the National Secu- rity Advisor. Under President Eisenhower, the holder of this position served as the principal executive officer of the Council, setting the agenda, brief- ing the President on Council matters, and su- pervising the staff. He was not a policy advo- cate. It was not until President Kennedy, with McGeorge Bundy in the role, that the position took on its current form. Bundy emerged as an important personal advisor to the President on national security affairs. This introduced an element of direct competition into Bundy's re- lationship with the members of the National Security Council. Although President Johnson changed the title of the position to simply "Special Assistant," in the hands of Walt Rostow it continued to play an important role. President Nixon relied heavily on his Nation- al Security Advisor, maintaining and even en- hancing its prominence. In that position, Henry Kissinger became a key spokesman for the President's national security policies both to the U.S. press and to foreign governments. President Nixon used him to negotiate on behalf of the United States with Vietnam, China, the Soviet Union, and other countries. The roles of spokesman and negotiator had tra- ditionally been the province of the Secretary of State, not of the National Security Advisor. The emerging tension between the two positions was only resolved when Kissinger assumed them both. Under President Ford, Lt Gen Brent Scow- croft became National Security Advisor, with Henry Kissinger remaining as Secretary of State. The National Security Advisor exercised major responsibility for coordinating for the President the advice of his NSC principals and overseeing the process of policy development and implementation within the Executive Branch. President Carter returned in large part to the early Kissinger model, with a resulting increase in tensions with the Secretary of State. Presi- dent Carter wanted to take the lead in matters of foreign policy, and used his National Securi- ty Advisor as a source of information, ideas, and new initiatives. The role of the National Security Advisor, like the role of the NSC itself, has in large measure been a function of the operating style of the President. Notwithstanding, the National Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Security Advisor has come to perform, to a greater or lesser extent, certain functions which appear essential to the effective discharge of the President's responsibilities in national secu- rity affairs. ? He is an "honest broker" for the NSC process. He assures that issues are clearly presented to the President; that all reason- able options, together with an analysis of their disadvantages and risks, are brought to his attention; and that the views of the President's other principal advisors are ac- curately conveyed. ? He provides advice from the President's vantage point, unalloyed by institutional responsibilities and biases. Unlike the Sec- retaries of State or Defense, who have sub- stantial organizations for which they are responsible, the President is the National Security Advisor's only constituency. ? He monitors the actions taken by the exec- utive departments in . implementing the President's national security policies. He asks the question whether these actions are consistent with Presidential decisions and whether, over time, the underlying policies continue to serve U.S. interests. ? He has a special role in crisis manage- ment. This has resulted from the need for prompt and coordinated action under Presidential control, often with secrecy being essential. ? He reaches out for new ideas and initia- tives that will give substance to broad Presidential objectives for national securi- ty. ? He keeps the President informed about international developments and develop- ments in the Congress and the Executive Branch that affect the President's policies and priorities. But the National Security Advisor remains the creature of the President. The position will be largely what he wants it to be. This presents any President with a series of dilemmas. ? The President must surround himself with people he trusts and to whom he can speak in confidence. To this end, the Na- tional Security Advisor, unlike the Secre- taries of State and Defense, is not subject to confirmation by the Senate and does not testify before Congress. But the more the President relies on the National Secu- rity Advisor for advice, especially to the exclusion of his Cabinet officials, the greater will be the unease with this arrangement. ? As the "honest broker" of the NSC proc- ess, the National Security Advisor must ensure that the different and often con- flicting views of the NSC principals are presented fairly to the President. But as an independent advisor to the President, he must provide his own judgment. To the extent that the National Security Advisor becomes a strong advocate for a particular point of view, his role as "honest broker" may be compromised and the President's access to the unedited views of the NSC principals may be impaired. ? The Secretaries of State and Defense, and the Director of Central Intelligence, head agencies of government that have specific statutory responsibilities and are subject to Congressional oversight for the implemen- tation of U.S. national security policy. To the extent that the National Security Advi- sor assumes operational responsibilities, whether by negotiating with foreign gov- ernments or becoming heavily involved in military or intelligence operations, the le- gitimacy of that role and his authority to perform it may be challenged. ? The more the National Security Advisor becomes an "operator" in implementing policy, the less will he be able objectively to review that implementation-and whether the underlying policy continues to serve the interests of the President and the nation. ? The Secretary of State has traditionally been the President's spokesman on mat- ters of national security and foreign af- fairs. To the extent that the National Secu- rity Advisor speaks publicly on these mat- ters or meets with representatives of for- eign governments, the result may be con- fusion as to what is the President's policy. C. The NSC Staff At the time it established the National Secu- rity Council, Congress authorized a staff headed by an Executive Secretary appointed by Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 the President. Initially quite small, the NSC staff expanded substantially under President Eisenhower. During the Eisenhower Administration, the NSC' staff assumed two important functions: co- ordinating the executive departments in the de- velopment of national policy (through the NSC Planning Board) and overseeing the implemen- tation of that policy (through the Operations Coordination Board). A systematic effort was made to coordinate policy development and its implementation by the various agencies through an elaborate set of committees. The system worked fairly well in bringing together for the President the views of the other NSC principals. But it has been criticized as biased toward reaching consensus among these princi- pals rather than developing options for Presi- dential decision. By the end of his second term, President Eisenhower himself had reached the conclusion that a highly competent individual and a small staff could perform the needed functions in a better way. Such a change was made by President Kennedy. Under President Kennedy, a number of the functions of the NSC staff were eliminated and its size was sharply reduced. The Planning and Operations Coordinating Boards were abol- ished. Policy development and policy imple- mentation were assigned to individual Cabinet officers, responsible directly to the President. By late 1962 the staff was only 12 profession- als, serving largely as an independent source of ideas and information to the President. The system was lean and responsive, but frequently suffered from a lack of coordination. The John- son Administration followed much the same pattern. The Nixon Administration returned to a model more like Eisenhower's but with some- thing of the informality of the Kennedy/John- son staffs. The Eisenhower system had empha- sized coordination; the Kennedy Johnson system tilted to innovation and-the generation of new ideas. The Nixon system emphasized both. The objective was not inter-departmental consensus but the generation of policy options for Presidential decision, and then ensuring that those decisions were carried out. The staff grew to 50 professionals in 1970 and became a major factor in the national security decision- making process. This approach was largely con- tinued under President Ford. The NSC staff retained an important role under President Carter. While continuing to have responsibility for coordinating policy among the various executive agencies, Presi- dent Carter particularly looked to the NSC staff as a personal source of independent advice. President Carter felt the need to have a group loyal only to him from which to launch his own initiatives and to move a vast and lethargic gov- ernment. During his time in office, President Carter reduced the size of the professional staff to 35, feeling that a smaller group could do the job and would have a closer relationship to him. What emerges from this history is an NSC staff used by each President in a way that re- flected his individual preferences and working style. Over time, it has developed an important role within the Executive Branch of coordinat- ing policy review, preparing issues for Presi- dential decision, and monitoring implementa- tion. But it has remained the President's crea- ture, molded as he sees fit, to serve as his per- sonal staff for national security affairs. For this reason, it has generally operated out of the public view and has not been subject to direct oversight by the Congress. D. The Interagency Committee System The National Security Council has frequently been supported by committees made up of rep- resentatives of the relevant national security departments and agencies. These committees analyze issues prior to consideration by the Council. There are generally several levels of committees. At the top level, officials from each agency (at the Deputy Secretary or Under Sec- retary level) meet to provide a senior level policy review. These senior-level committees are in turn supported by more junior inter- agency groups (usually at the Assistant Secre- tary level). These in turn may oversee staff level working groups that prepare detailed analysis of important issues. Administrations have differed in the extent to which they have used these interagency com- mittees. President Kennedy placed little stock in them. The Nixon and Carter Administra- tions, by contrast, made much use of them. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 E. The Reagan Model President Reagan entered office with a strong commitment to cabinet government. His principal advisors on national security affairs were to be the Secretaries of State and De- fense, and to a lesser extent the Director of Central Intelligence. The position of the Na- tional Security Advisor was initially downgrad- ed in both status and access to the President. Over the next six years, five different people held that position. The Administration's first National Security Advisor, Richard Allen, reported to the Presi- dent through the senior White House staff. Consequently, the NSC staff assumed a re- duced role. Mr. Allen believed that the Secre- tary of State had primacy in the field of foreign policy. He viewed the job of the National Secu- rity Advisor as that of a policy coordinator. President Reagan initially declared that the National Security Council would be the princi- pal forum for consideration of national security issues. To support the work of the Council, President Reagan established an interagency committee system headed by three Senior Interagency Groups (or "SIGs"), one each for foreign policy, defense policy, and intelligence. They were chaired by the Secretary of State, the Secretary of Defense, and the Director of Central Intelligence, respectively. Over time, the Administration's original con- ception of the role of the National Security Ad- visor changed. William Clark, who succeeded Richard Allen in 1982, was a long-time associ- ate of the President and dealt directly with him. Robert McFarlane, who replaced judge Clark in 1983, although personally less close to the President, continued , to have direct access to him. The same was true for VADM John Poin- dexter, who was appointed to the position in December, 1985. President Reagan appointed several addition- al members to his National Security Council and allowed staff attendance at meetings. The resultant size of the meetings led the President to turn increasingly to a smaller group (called the National Security Planning Group or "NSPG"). Attendance at its meetings was more restricted but included the statutory principals of the NSC. The NSPG was supported by the SIGs, and new SIGs were occasionally created to deal with particular issues. These were fre- quently chaired by the National Security Advi- sor. But generally the SIGs and many of their subsidiary groups (called Interagency Groups or "IGs") fell into disuse. As a supplement to the normal NSC process, the Reagan Administration adopted compre- hensive procedures for covert actions. These are contained in a classified document, NSDD- 159, establishing the process for deciding, im- plementing, monitoring, and reviewing covert activities. F. The Problem of Covert Operations Covert activities place a great strain on the process of decision in a free society. Disclosure of even the existence of the operation' could threaten its effectiveness and risk embarrass- ment to the Government. As a result, there is strong pressure to withhold information, to limit knowledge of the operation to a minimum number of people. These pressures come into play with great force when covert activities are undertaken in an effort to obtain the release of U.S. citizens held hostage abroad. Because of the legitimate human concern all Presidents have felt over the fate of such hostages, our national pride as a powerful country with a tradition of protecting its citizens abroad, and the great attention paid by the news media to hostage situations, the pressures on any President to take action to free hostages are enormous. Frequently to be effective, this action must necessarily be covert. Disclosure would directly threaten the lives of the hostages as well as those willing to contem- plate their release. Since covert arms sales to Iran played such a central role in the creation of this Board, it has focused its attention in large measure on the role of the NSC staff where covert activity is in- volved. This is not to denigrate, however, the importance of other decisions taken by the gov- ernment. In those areas as well the National Security Council and its staff play a critical role. But in many respects the best test of a system is its performance under stress. The conditions of greatest stress are often found in the crucible of covert activities. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Arms Transfers to Iran, Diversion, and Support for the Contras The Iran/Contra matter has been and, in some respects, still is an enigma. For three months the Board sought to learn the facts, and still the whole matter cannot be fully ex- plained. The general outlines of the story are clear. The story is set out here as we now know it. Given the President's injunction that he wanted "all the facts to come out," the Board sought to include all relevant materials. The Board tried to be faithful to the testimony and documents that came before it. This Board was not established, however, as an investigative body nor was it to determine matters of crimi- nal culpability. Rather, the Board was estab- lished to gather the facts, to place them in their proper historical context, and to make recom- mendations about what corrective steps might be taken. The limits of time, resources, and legal au- thority were handicaps but not unreasonable ones. The Board had no authority to subpoena documents, compel testimony, swear witnesses, or grant immunity. But these limitations did not prevent the Board from assembling sufficient information to form a basis for its fundamental judgments. The Board received a vast quantity of docu- ments and interviewed over 80 witnesses. The Board requested all affected departments and agencies to provide all documents relevant to the Board's inquiry. The Board relied upon these agencies to conduct thorough searches for all relevant materials in their possession. In addition, the Board reviewed the results and relevant portions of working files from both the CIA and Department of the Army Inspectors General reports. Several individuals declined our request to appear before the Board: VADM John Poin- dexter; General Richard Secord, USAF Ret.; LtCol Oliver North; LtCol Robert Earl; Mr. Albert Hakim; and Miss Fawn Hall. The Board requested that the President exercise his powers as Commander-in-Chief and order VADM Poindexter and LtCol North to appear. The President declined.' Despite the refusal of VADM Poindexter and LtCol North to appear, the Board's access to other sources of information filled much of this gap. The FBI provided documents taken from the files of the National Security Advisor and relevant NSC staff members, including mes- sages from the PROF system 2 between VADM Poindexter and LtCol North. The PROF mes- sages were conversations by computer, written at the time events occurred and presumed by the writers to be protected from dislosure. In this sense, they provide a first-hand, contempo- raneous account of events. In the closing days of the Board's inquiry, we gained access to a considerable number of ad- ditional exchanges on PROFs between VADM Poindexter, LtCol North, and Mr. McFarlane. 1 The correspondence to the President from the Board's Chair- man and the reply, on his behalf, of White House Counsel Peter Wallison, are at Appendix G. 2 The "PROF" system, The Professional Office System, is an interoffice mail system run through an IBM main frame computer and managed by the White House Communications Agency for the NSC. All NSC officers have personal passwords which enable them to send and receive messages to each other from terminals at their desks . Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 The Board had access to another contempo- government was either barred or restricted by raneous record of events. The President keeps Congress. A more detailed narrative of this evi- a diary in which he chronicles, in long hand, dence is set out in Appendix C. key events that occurred during the day. Presi- dent Reagan reviewed his notes and, at the Section A: The Arms Board's request, culled from them the relevant to Iran ed Transfers notes he had made on particular dates request- by the Board. The Board was permitted to review but not to retain a typewritten copy of Two persistent concerns lay behind U.S. par- these diary entries. ticipation in arms transfers to Iran. No one interviewed by the Board seemed First, the U.S. government anxiously sought able to provide a unified account of the events the release of seven U.S. citizens abducted in in August independent of calendars or meeting Beirut, Lebanon, in seven separate incidents notes. In the lives of these particularly busy in- between March 7, 1984, and June 9, 1985. One dividuals this should not be surprising. This of those abducted was William Buckley, CIA lack of a total and accurate recall may suggest station chief in Beirut, seized on March 16, an equally important point: when these events 1984. Available intelligence suggested that occurred, they were not treated by many of the most, if not all, of the Americans were held participants as sufficiently important. hostage by members of Hizballah, a fundamen- Those that are present at meetings or privy talist Shiite terrorist group with links to the to conversations will retain different impres- regime of the Ayatollah Khomeini. sions of what occurred. That certainly hap- Second, the U.S. government had a latent pened here. Many of these events occurred and unresolved interest in establishing ties to almost two years ago, and memories fade. Iran. Few in the U.S. government doubted There is also the chance that, for whatever Iran's strategic importance or the risk of Soviet reason, individuals concealed evidence or delib- meddling in the succession crisis that might erately misled the Board. In any event, the follow the death of Khomeini. For this reason, Board's mandate was not to resolve conflicts some in the U.S. government were convinced among various recollections but to attempt to that efforts should be made to open potential ascertain the essential facts as they affect con- channels to Iran. clusions about the national security process. Arms transfers ultimately appeared to offer a The Independent Counsel at various points means to achieve both the release of the hos- denied the Board access to some materials in tages and a strategic opening to Iran. which he had established an interest. The Gov- The formulation, development, and imple- ernment of Israel was asked to make certain in- mentation of the Iran initiative passed through dividuals available in any way that would be seven distinct stages. Each is analyzed in this convenient to them. They declined to do so. section of the report. For the purposes of the They agreed to answer written interrogatories. Board's mandate, the critical questions for each We dispatched those to the Government of stage are: What was U.S. policy? How were de- Israel but no response has, as yet, been re- cisions made? What action was authorized and ceived. by whom? How was this action carried out? The first section of this Part III summarizes What happened as a result? the evidence b f h B e ore t e oard concerning the arms transfers to Iran. A more detailed narra- tive of this evidence is set out in Appendix B. The second section summarizes the evidence before the Board concerning a diversion of funds from the arms sales to the support of the Contras fighting in Nicaragua. The third section summarizes the evidence accumulated by the Board concerning the role of the NSC staff in the support of the Contras during the period that support from the U.S. Stage 1: The NSC Staff Seeks a New Look at U.S. Policy on Iran The Shah of Iran was overthrown on January 16, 1979, ending an intimate, twenty-five year relationship between the United States and Iran. Mutual hostility and tension characterized U.S. relations with the regime of the Ayatollah Khomeini, which, after some months, succeed- ed the Shah's rule. On November 4, 1979, radi- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 - Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 cal Iranian elements seized the U.S. embassy in Tehran and held its staff hostage. The United States responded by blocking the transfer of all property of the Iranian government, imposing a trade embargo, freezing all other Iranian assets, and breaking diplomatic relations. In ad- dition, the United States imposed an embargo on all arms shipments to Iran, including arms that had been purchased under the Shah but not yet delivered. On January 19, 1981, many of these restric- tions were lifted, as part of the agreement that led to the release of the embassy staff. Howev- er, this did not extend to the embargo on arms transfers. Iraq had attacked Iran on September 22, 1980. The United States had adopted a policy of neutrality and refused to ship arms to either side. The result was a continuation of the arms embargo against Iran. The Reagan Administration had adopted a tough line against terrorism. In particular, the United States adamantly opposed making any concessions to terrorists in exchange for the re- lease of hostages-whether by paying ransom, releasing prisoners, changing policies, or other- wise. Some time in July of 1982, the United States became aware of evidence suggesting that Iran was supporting terrorist groups, in- cluding groups engaged in hostage-taking. On January 20, 1984, the Secretary of State desig- nated Iran a sponsor of international terror- ism.3 Thereafter, the United States actively pressured its allies not to ship arms to Iran, both because of its sponsorship of international terrorism and its continuation of the war with Iraq. The NSC Staff Initiates a Reevaluation. By early 1984, Robert McFarlane, the National Security Advisor, and members of the NSC staff, had become concerned about future U.S. policy toward Iran. They feared that the death of Khomeini would touch off a succession struggle which would hold important consequences for U.S. interests. They believed that the United States lacked a strategy and capability for deal- ing with this prospect. Initially, Mr. McFarlane tried to use the formal interagency policy process to address 3 On August 27, 1986, a new section was added to the Arms Export Control Act which prohibited the export of arms to coun- tries which the Secretary of State has determined support acts of international terrorism. Such a determination was in effect at that time for Iran. this issue. On August 31, 1984, he requested an interagency study of U.S. relations with Iran after Khomeini. On October 19, 1984, the State Department sent Mr. McFarlane the inter- agency response to his request. It concluded that the United States had "no influential con- tacts" within the Iranian government or Iranian political groups. The study suggested little that the United States could do to establish such contacts. Separately, in a letter dated December 11, 1984, to Mr. McFarlane's deputy, VADM John Poindexter, the CIA professed only a lim- ited capability to influence events in Iran over the near term. The Reevaluation Yields No New Ideas. Howard Teicher, one of the NSC staff -members in- volved, told the Board that the interagency effort failed to identify any new ideas for sig- nificantly expanding U.S. influence in Iran. It resulted in no change in U.S. policy. The U.S. government continued aggressively to discour- age arms transfers by other nations to Iran under a program called "Operation Staunch." Stage 2: The NSC Staff Tries a Second Time Mr. Teicher, Donald Fortier, and perhaps other NSC staff members were unhappy with the result of the interagency effort. They placed a high priority on fashioning a strategy for acquiring influence and checking the Sovi- ets in Iran. Graham Fuller, then the National Intelligence Officer for the Near East and South Asia, told the Board that in early 1985 the U.S. intelligence community began to be- lieve that serious factional fighting could break out in Iran even before Khomeini died. This change in the community's assessment provid- ed a second opportunity for a policy review. The NSC Staff Suggests Limited Arms Sales. Mr. Teicher, and to a lesser extent Mr. Fortier, worked closely with CIA officials to prepare an update of a previous "Special National Intelli- gence Estimate" (or "SNIE") on Iran. Dated May 20, 1985, the update portrayed the Soviets as well positioned to take advantage of chaos inside Iran. The United States, by contrast, was unlikely to be able directly to influence events. Our European and other allies could, however, provide a valuable presence to help protect Western interests. The update concluded that the degree to which these allies "can fill a mili- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 tary gap for Iran will be a critical measure of the West's ability to blunt Soviet influence." On June 11, 1985, Mr. Fortier and Mr. Teicher submitted to Mr. McFarlane a draft Presidential decision document (a National Se- curity Decision Directive or "NSDD") drawing on the intelligence update. The draft set out immediate and long-term U.S. goals and listed specific steps to achieve them. First on the list was to "[e]ncourage Western allies and friends to help Iran meet its import requirements * * * includ[ing] provision of selected military equip- ment * * *." The memorandum from Mr. Fortier and Mr. Teicher transmitting the draft NSDD to Mr. McFarlane suggested that "[b]ecause of the po- litical and bureaucratic sensitivities," Mr. McFarlane should provide copies of the NSDD only to Secretary of State Shultz and Secretary of Defense Weinberger. "Whether to proceed with a restricted SIG [Senior Interagency Group], NSPG [National Security Planning Group], or other forum [for consideration of the draft] would depend on their reactions." Mr. McFarlane circulated the draft on June 17, 1985, to Secretary Shultz, Secretary Wein- berger, and Director of Central Intelligence Casey. His transmittal memorandum requested that further distribution remain limited to lessen the risk of leaks. In letters to Mr. McFar- lane dated June 29, 1985, and July 16, 1985, respectively, both Secretary Shultz and Secre- tary Weinberger objected sharply to the sug- gestion that the United States should permit or encourage transfers of Western arms to Iran. By contrast, in his reply of July 18, 1985, Direc- tor Casey "strongly endorse[d]" the thrust of the draft NSDD and particularly its emphasis on the need to take "concrete and timely steps to enhance U.S. leverage." He did not specifi- cally address the issue of arms sales. The Suggestion Dies. Mr. Teicher told the Board that the strong objections from Secretary Shultz and Secretary Weinberger apparently killed the draft NSDD. In mid-August he was told to "stand down" on the effort. The draft was never submitted to the President for his consideration or signature. The abandonment of the draft NSDD marked the end of efforts by Mr. McFarlane and the NSC staff to use the formal interagency policy process to obtain an explicit change in U.S. policy toward Iran. From this point on, the matter moved along a different track. Stage 3: The Israelis Provide a Vehicle While the NSC staff was seeking a reexam- ination of U.S. policy toward Iran, several staff members were growing ever more concerned about the hostage issue. On June 14, 1985, TWA flight 847 was hijacked enroute from Athens to Rome, with 135 U.S. citizens aboard. It was not until June 29 that all the hostages were released. One U.S. citizen was executed. The event dominated the news in the United States and dramatized the hostage issue. Frus- tration at the lack of progress in freeing the hostages in Beirut grew perceptibly within the U.S. government, especially in the face of pleas to the President for action by the families of the hostages. In the summer of 1985, a vehicle appeared that offered the prospect of progress both on the release of the hostages and a stra- tegic opening to Iran. Israel had long-standing interests in a rela- tionship with Iran and in promoting its arms export industry. Arms sales to Iran could fur- ther both objectives. It also offered a means of strengthening Iran against Israel's old adver- sary, Iraq. Much of Israel's military equipment came originally from the United States, howev- er. For both legal and political reasons, Israel felt a need for U.S. approval of, or at least ac- quiescence in, any arms sales to Iran. In addi- tion, elements in Israel undoubtedly wanted the United States involved for its own sake so as to distance the United ' States from the Arab world and ultimately to establish Israel as the only real strategic partner of the United States in the region. Iran badly wanted what Israel could provide. The United States had been the primary source of arms for the Shah, but U.S. shipments to Iran were now barred by the embargo. Iran desperately wanted U.S.-origin TOW and HAWK missiles,4 in order to counter Iraq's 4 The acronym "TOW" stands for tube-launched, optically- tracked, wire-guided missile. It is a man-portable anti-tank mis- sile. A "HAWK" is a type of ground-launched, anti-aircraft mis- sile. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 chief areas of superiority-armor and air forces. Since Israel had these weapons in its in- ventory, it was an alternative source of supply. Israel was more than willing to provide these weapons to Iran, but only if the United States approved the transfer and would agree to re- place the weapons. Iranian interest in these weapons was widely known among those connected with the arms trade. These included Manucher Ghorbanifar, an Iranian businessman living in France, and Adolph Schwimmer and Yaacov Nimrodi, pri- vate Israeli arms dealers with contacts through- out the Middle East including Israel. Since Sep- tember, 1984, Mr. Schwimmer had also been a consultant to then-Prime Minister of Israel Shimon Peres. In a series of meetings begin- ning in January, 1985, these men had discussed using arms sales to obtain the release of the U.S. citizens held hostage in Beirut and to open a strategic dialogue with Iran. Some of those meetings included Amiram Nir, since September, 1984, an advisor to Prime Minister Peres on counterterrorism. Also involved was Saudi businessman Adnan Khashoggi, a man well-connected in the Middle East and enjoying a special relationship with key Israeli officials. All these men subsequently played a role in the brokering of the arms deals that later did occur. These men believed that the United States, Israel, and Iran, though with different interests, were susceptible to a relationship of conven- ience involving arms, hostages, and the open- ing of a channel to Iran. The catalyst that brought this relationship into being was the proffering by Israel of a channel for the United States in establishing contacts with Iran. An Opening to Iran. On the 4th or 5th of May, 1985, Michael Ledeen, an NSC staff consultant, with the knowledge of Mr. McFarlane, went to Israel and met with Prime Minister Peres. Mr. Ledeen told the Board that he asked about the state of Israeli intelligence on Iran and whether Israel would be willing to share its intelligence with the United States. Two months later, the United States received the first of three sepa- rate requests regarding Iran from the Israeli government. The first two occurred in July, 1985. (i) The July Requests. On July 3, 1985, David Kimche, the Director General of the Israeli Foreign Ministry, met at the White House with Mr. McFarlane. Mr. McFarlane told the Board that Mr. Kimche asked the position of the U.S. government toward engaging in a political dis- course with Iranian officials. He recalled Mr. Kimche as saying that these Iranian officials had conveyed to Israel their interest in a dis- course with the United States. Contact was to be handled through an intermediary (later dis- closed to be Mr. Ghorbanifar) who was repre- sented as having good connections to Iranian officials. This was not the first time that Mr. Ghorban- ifar had come to the attention of the U.S. gov- ernment. The CIA knew of Mr. Ghorbanifar and had a history of contacts with him. CIA's first contact with Ghorbanifar was through a European intelligence service in January 1980. From the beginning, CIA found it "difficult to filter out the bravado and exaggeration from what actually happened." Other intelligence services had similar experiences with Mr. Ghor- banifar. By September of 1980, CIA decided to drop efforts at recruiting Ghorbanifar. It con- sidered him neither reliable nor trustworthy. In addition, Theodore Shackley, a former CIA of- ficial, had met Mr. Ghorbanifar in Hamburg, West Germany, between November 19-21, 1984. Mr. Ghorbanifar at that time suggested payment of a cash ransom for the hostages in Beirut, with himself as middleman. This pro- posal, contained in a memorandum prepared by Mr. Shackley dated November 22, 1984, ap- parently reached the State Department where it elicited no interest. A memorandum from Mr. Shackley dated June 7, 1985, containing a later suggestion by Mr. Ghorbanifar that the ransom involve items "other than. money," also drew no response. At the time of his meeting with Mr. Kimche, Mr. McFarlane apparently did not know this background or even that Mr. Ghor- banifar was the intermediary Mr. Kimche had in mind. He learned this later in the month from Mr. Ledeen. Mr. McFarlane. told the Board that Mr. Kimche told him the Iranians understood that they would have to demonstrate their "bona fides" and that the Iranians believed they could influence Hizballah to release the hostages in Beirut. But Mr. McFarlane also recalled Mr. Kimche expressing the view that ultimately the Iranians would need something to show for the Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 dialogue, and that this would "probably" be weapons. Mr. McFarlane testified that he informed the President of his conversation with Mr. Kimche within three or -four days after the meeting, shortly before the President entered the hospi- tal for his cancer operation. Mr. McFarlane also stated that on July 13, 1985, he briefed Secre- tary Shultz, Secretary Weinberger, and Director Casey in separate conversations. Mr. McFarlane told the Board that the President was interest- ed in the proposal and said that he believed we should explore it. Mr. McFarlane said this may have occurred in the first week of July, before the President entered the hospital. On July 13, 1985, Mr. McFarlane apparently received a second request, this time brought by an emissary directly from Israeli Prime Minister Peres. The "emissary" was Mr. Schwimmer, who delivered the request to Mr. McFarlane through Mr. Ledeen. The emissary carried word of a recent meeting with Mr. Ghorbanifar and another Iranian in which the Iranians had said that others inside Iran were interested in more extensive relations with the West, and particularly, the United States. The Iranians re- portedly said that their contacts in Iran could achieve the release of the seven Americans held in Lebanon but in exchange sought 100 TOW missiles from Israel. This was to be part of a "larger purpose" of opening a "private dia- logue" on U.S./Iranian relations. The emissary asked for a prompt response. Mr. McFarlane stated that he passed the President's decision to David Kimche by telephone. On July 14, 1985, Mr. McFarlane cabled this proposal to Secretary Shultz, who was traveling in Asia. Mr. McFarlane recommended a tenta- tive show of interest in a dialogue but with no commitment to the arms exchange. He asked for Secretary Shultz's guidance and indicated he would "abide fully" by the Secretary's deci- sion. By return cable on the same day, Secre- tary Shultz agreed to "a tentative show of inter- est without commitment." He said this was consistent with U.S. policy of "maintaining con- tact with people who might eventually provide information or help in freeing hostages." Sec- retary Shultz advised Mr. McFarlane to "handle this probe personally" but asked that he stay in close contact. White House Chief of Staff Regan told the Board that he and Mr. McFarlane met with the President on this issue in the hospital a few days after the President's cancer operation on July 13. Mr. Regan told the Board that the matter was discussed for 20 to 25 minutes, with the President asking quite a few questions. He recalled the President then saying "yes, go ahead. Open it up." In his meeting with the Board on February 11, 1987, the President said he had no recollec- tion of a meeting in the hospital in July with Mr. McFarlane and that he had no notes that would show such a meeting. (ii) The August Request. On August 2, 1985, Mr. McFarlane again met at the White House with Mr. Kimche. According to Mr. McFarlane, Mr. Kimche said that the Iranians had asked whether the United States would supply arms to Iran. Mr. McFarlane recalled responding that he thought not. He told the Board that Mr. Kimche then asked what the U.S. reaction would be if Israel shipped weapons to Iran, and whether the United States would sell replace- ments "whether it's HAWKs or TOWs or what- ever else." Mr. McFarlane recalled telling Mr. Kimche he would "get you our position." What followed is quite murky. Most NSC principals apparently had an op- portunity to discuss this request with the Presi- dent in and around the first two weeks of August. There clearly was a series of meetings with one or more of the principals in attend- ance. In addition, a number of the participants seem to recall a single meeting at which all the principals were present. White House records, however, show no meetings of the NSC princi- pals in August scheduled for the purpose of discussing this issue. Other evidence suggests that there were meetings of the NSC principals in August at which this issue could have been discussed. It is also unclear what exactly was under con- sideration at this time. No analytical paper was prepared for the August discussions and no formal minutes of any of the discussions were made. Mr. McFarlane said that Mr. Kinche made a special proposal that 100 TOWs to Iran would establish good faith and result in the release of all the hostages. Mr. McFarlane told the Board that he discussed this proposal with the Presi- dent several times and, on at least one occa- sion, with all the "full" members of the NSC. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Within days after the meeting, the President communicated his decision to Mr. McFarlane by telephone. He said the President decided that, if Israel chose to transfer arms to Iran, in modest amounts not enough to change the military balance and not including major weapon systems, then it could buy replace- ments from the United States. Mr. McFarlane said that the President also indicated that the United States was interested in a political meet- ing with the Iranians. Mr. McFarlane said he re- minded the President of the opposition ex- pressed by Secretary Shultz and Secretary Weinburger, but that the President said he wanted to go ahead-that he, the President, would take "all the heat for that." Mr. McFarlane told the Board that he subse- quently conveyed the President's decision to Mr. Kimche. He said that he emphasized to Mr. Kimche that the U.S. purpose was a political agenda with Iran, not an exchange of arms for hostages. Mr. McFarlane told the Board that he also conveyed this decision to the NSC princi- pals. Secretary Shultz told the Board that on August 6, 1985, during one of his regularly scheduled meetings with the President, he dis- cussed with the President a proposal for the transfer of 100 TOW missiles from Israel. The Iranians were for their part to produce the re- lease of four or more hostages. Secretary Shultz told the Board that he opposed the arms sales at the meeting with the President. He said that Mr. McFarlane was present at this meeting. Secretary Schultz did not recall a telephone call from Mr. McFarlane regarding a decision by the President. Secretary Weinberger recalled a meeting with the President at his residence after the Presi- dent's return from the hospital. He told the Board that he argued forcefully against arms transfers to Iran, as did George Shultz. He said he thought that the President agreed that the idea should not be pursued. Mr. Regan also recalled an August meeting with the President. He told the Board that the President expressed concern with any one-for- one swap of arms for hostages and indicated "we should go slow on this but develop the contact." Mr. Regan also told the Board that in early September, Mr. McFarlane informed the President that Israel had sold arms to the Irani- ans and hoped to get some hostages out. Mr. Regan stated that the President was "upset" at the news and that Mr. McFarlane explained that the Israelis had "simply taken it upon themselves to do this." Mr. Regan said that after some discussion, the President decided to "leave it alone." In his meeting with the Board on January 26, 1987, the President said that sometime in August he approved the shipment of arms by Israel to Iran. He was uncertain as to the pre- cise date. The President also said that he ap- proved replenishment of any arms transferred by Israel to Iran. Mr. McFarlane's testimony of January 16, 1986, before the Senate Foreign Relations Committee, which the President em- braced, takes the same position. This portion of Mr. McFarlane's testimony was specifically highlighted on the copy of testimony given by the President to the Board. In his meeting with the Board on February 11, the President said that he and Mr. Regan had gone over the matter a number of times and that Mr. Regan had a firm recollection that the President had not authorized the August shipment in advance. The President said he did not recall authorizing the August shipment in advance. He noted that very possibly, the trans- fer was brought to him as already completed. He said that subsequently there were arms shipments he authorized that may have had to do with replenishment, and that this approval for replenishment could have taken place in September. The President stated that he had been "surprised" that the Israelis had shipped arms to Iran, and that this fact caused the President to conclude that he had not approved the transfer in advance. In a subsequent letter to the Board received on February 20, 1987, the President wrote: "In trying to recall events that happened eighteen months ago I'm afraid that I let myself be influ- enced by others' recollections, not my own . . . ". . . I have no personal notes or records to help my recollection on this matter. The only honest answer is to state that try as I might, I cannot recall anything whatsoever about whether I approved an Israeli sale in advance or whether I approved replenish- ment of Israeli stocks around August of 1985. My answer therefore and the simple truth is, `I don't remember-period.' " Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The Board tried to resolve the question of whether the President gave prior approval to Israel's transfer of arms to Iran. We could not do so conclusively. We believe that an Israeli request for approv- al of such a transfer was discussed before the President in early August. We believe that Sec- retary Shultz and Secretary Weinberger ex- pressed at times vigorous opposition to the proposal. The President agreed to replenish Is- raeli stocks. We are persuaded that he most likely provided this approval prior to the first shipment by Israel. In coming to this conclusion, it is of para- mount importance that the President never op- posed the idea of Israel transferring arms to Iran. Indeed, four months after the August shipment, the President authorized the United States government to undertake directly the very same operation that Israel had proposed. Even if Mr. McFarlane did not have the Presi- dent's explicit prior approval, he clearly had his full support. A Hostage Comes Out. On August 30, 1985, Israel delivered 100 TOWs to Iran. A subse- quent delivery of 408 more TOWs occurred on September 14, 1985.5 On September 15, 1985, Reverend Benjamin Weir was released by his captors. Mr. Ghorbanifar told the Board that the 100 TOWs were not linked to a hostage release. They were to evidence U.S. seriousness in rees- tablishing relations with Iran. The next step was to be the delivery of 400 more TOWs, for which Iran was to free a hostage. The goal was to establish a new relationship between the two countries, which would include a pledge by Iran of no further terrorist acts against the United States or its citizens by those under Iran's control. Mr. McFarlane said that he received a tele- phone call from Mr. Kimche informing him of Rev. Weir's impending release about a week before it occurred. LtCol North, the NSC staff officer with responsibility for terrorism policy, made arrangements for receiving and debrief- ing Rev. Weir. Although it appears that Israel and the United States expected the release of the re- ' The financing of these and other arms transactions discussed in this Part III is described in detail in the charts annexed to the end of Appendix B. maining hostages to accompany or follow the release of Rev. Weir, this did not occur. Stage 4: The Initiative Appears to Founder The United States had only a supporting role in the August and September deliveries to Iran. Israel managed the operation. The next three months saw an increasing U.S. role. A number of important developments re- garding the Iran initiative occurred between September and December, 1985. However, it proved difficult for the Board to establish pre- cisely what happened during'.this period. This is in part because the period was one of great activity for the President, the NSC principals, and Mr. McFarlane. Issues that seemed to be both more important and more urgent than the Iran initiative clearly preoccupied them. Mr. McFarlane described the foreign policy agenda for the period. The Soviet foreign min- ister visited Washington. Preparations for the Geneva Summit with General Secretary Gorba- chev were under way; this included four Presi- dential speeches on arms control, human rights, regional issues, and U.S./Soviet bilater- ial relations. The President delivered an ad- dress to the United Nations on the occasion of its 40th Anniversary. The President met with twelve to fifteen heads of State in New York and Washington. In the middle of this hectic schedule, on October 7, 1985, the Achille Lauro was seized by four Palestinian hijackers. An Arms for Hostages Deal. On October 8, 1985, LtCol North's calendar indicated that he met with Mr. Ledeen, Mr. Schwimmer, Mr. Nimrodi, and Mr. Ghorbanifar (using the alias of Nicholas Kralis). Other meetings may have occurred. There is little evidence of what exact- ly went on in these meetings. All that is known for sure is that shortly after those meetings, David Kimche advanced a third proposal. Mr. Kimche met with Mr. McFarlane and LtCol North on November 9, 1985. John McMahon, the Deputy Director of Central In- telligence, told the Board that Mr. McFarlane spoke with him on November 14. Mr. McFar- lane told Mr. McMahon that Mr. Kimche had indicated that the Israelis planned to provide some arms to moderates in Iran who would oppose Khomeini. Mr. McFarlane suggested that the Israelis interpreted the Presidential au- --_ Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 - Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 thorization as an open charter for further arms shipments as long as the shipments were modest and did not alter the military balance between Iran and Iraq. Indeed, he did not recall any specific request by Israel in the late fall. He did, however, remember that early in November, Yitzhak Rabin, Israel's Defense Minister, asked whether U.S. policy would still permit Israel to buy replacements from the U.S. for arms it transferred to Iran. Mr. McFar- lane confirmed that it would, although he indi- cated U.S. reservations about any trade of arms for hostages. They asked nothing further. In a message to VADM Poindexter on No- vember 20, 1985, LtCol North described the following plan. The Israelis were. to deliver 80 HAWK missiles to a staging area in a third country, at noon on Friday, November 22. These were to be loaded aboard three char- tered aircraft, which would take off at two hour intervals for Tabriz, Iran. Once launch of the first aircraft had been confirmed by Mr. Ghor- banifar, directions would be given to release the five U.S. citizens held hostage in Beirut. No aircraft was to land in Tabriz until all the hos- tages had been delivered to the U.S. embassy in Beirut. Israel would deliver forty additional HAWKs at a later time. The Iranians would commit to seeing that there were no further hostages seized. Secretary Shultz told the Board that Mr. McFarlane told him on November 18, 1985, about a plan that would produce the release of the hostages on Thursday, November 21. Sec- retary Shultz told the Board he told Mr. McFar- lane that had he known of it earlier, he would have stopped it. He nonetheless expressed the hope to Mr. McFarlane that the hostages would be released. It is not clear what other NSC principals, if any, were told in advance about the plan. Secretary Shultz said he told an associate on November 22 that "Bud says he's cleared with the President" on the plan. Chief of Staff Regan told the Board that the President was in- formed in advance of the Israeli HAWK ship- ment but was not asked to approve it. He said that Mr. McFarlane told the President early in the month on the margins of his briefings for the Geneva Summit to expect that a shipment of missiles would come from Israel through a third country to Iran, and that the hostages would come out. In his first meeting with the Board on Janu- ary 16, 1987, the President said he did.not re- member how the November shipment came about. The President said he objected to the shipment, and that, as a result of that objec- tion, the shipment was returned to Israel. In his second meeting with the Board on February 11, 1987, the President stated that both he and Mr. Regan agreed that they cannot remember any meeting or conversation in gen- eral about a HAWK shipment. The President said he did not remember anything about a call-back of the HAWKs. Nonetheless, that the United States would sell replacement HAWKs to Israel seems to have been assumed at least by VADM Poin- dexter from the start. LtCol North informed VADM Poindexter on November 20, 1985, that "IAW [in accordance with] your instructions I have told their [Israel's] agent that we will sell them 120 items [HAWKs] at a price that they can meet." Failure. In contrast to the August TOW ship- ment, the United States became directly in- volved in the November transfer of the HAWK missiles. Sometime on November 17 or 18, 1985, while Mr. McFarlane was in Geneva for the November summit, Mr. Rabin called Mr. McFarlane to say that a problem had arisen. Mr. McFarlane referred the matter to LtCol North. North signed a letter for Mr. McFarlane dated November 19, 1985, requesting Richard Secord, a retired U.S. Air Force general officer, to proceed to a foreign country, to arrange for the transfer of "sensitive material" being shipped from Israel. That day Mr. Secord made arrangements for transshipment of the Israeli HAWKs. But late in the day on November 21, these arrangements began to fall apart. The foreign government denied landing clearance to the aircraft bringing the HAWKs from Israel. LtCol North contacted Duane Clarridge of the CIA for assistance in obtaining the required landing clearance. When the CIA's efforts failed, LtCol North asked Mr. Clarridge to find a reliable commercial carrier to substitute for the Israeli flight. Mr. Clarridge put Mr. Secord in contact with a carrier that was a CIA proprietary. The plan went awry again on November 22, when Mr. Schwimmer allowed the lease to Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 expire on the three aircraft they had chartered to take the HAWKs to Tabriz. Mr. Secord was able to provide an aircraft for this leg of the journey, however. The CIA arranged for over- flight rights over a third country. On Novem- ber 25 the aircraft left a European country. De- livery was three days late, however, and the air- craft carried only 18 HAWKs. Contrary to LtCol North's description of this plan, the air- craft delivered the HAWKs before the release of any hostages. In fact, no hostages were ever released as a result of this delivery. Not only were just 18 of the initial shipment of HAWKs delivered, the HAWKs did not meet Iranian military requirements. In addition, they bore Israeli markings. Mr. Ghorbanifar told the Board that this caused great unhappiness in Iran and had disastrous consequences for the emerging relationship. Ultimately the Iranians returned 17 of the HAWKS to Israel. The eighteenth had been test-fired at an Iraqi air- craft flying over Kharg Island to determine the missile's effectiveness. When Deputy Director McMahon learned of the CIA role in the shipment some three or four days after the fact, he directed the CIA General Counsel to prepare a Covert Action Finding 6 providing Presidential authorization for the CIA's past support and any future sup- port to the Iran initiative. A Findipg was draft- ed and delivered to VADM Poindexter, but the evidence strongly suggests it was never signed by the President. Stage 5: The United States Sells Directly to Iran On November 30, 1985, Mr. McFarlane re- signed as National Security Advisor. VADM Poindexter was named National Security Advi- sor on December 4. That same day, LtCol North raised with VADM Poindexter a new proposal for an arms-for-hostages deal. It in- volved the transfer of 3,300 Israeli TOWs and 50 Israeli HAWKs in exchange for release of all the hostages. The arms were to be delivered in five installments, spread over a 24-hour period. Each installment was to result in the release of one or two hostages, so that in the end all five 6 Section 662 of the Foreign Assistance Act, the so-called Hughes-Ryan Amendment, prohibits covert operations by the CIA unless and until the President "finds such operation is im- portant to the national security of the United States." U.S. citizens held in Beirut and a French hos- tage would be freed.' If any installment did not result in a hostage release, all deliveries would stop. An Attempt to Break the Arms/Hostages Link. This proposal was considered at a meeting with the President on December 7 in the White House residence. The President, Secretary Shultz, Secretary Weinberger, Mr. Regan, Mr. McMahon, Mr. McFarlane, and VADM Poin- dexter attended. Secretary Shultz described the meeting as the first "formal meeting" on the Iran initiative where the participants were in- formed in advance of the subject and had time to prepare. Mr. McFarlane said that the partici- pants reviewed the history of the program. However, no analytical paper was circulated for discussion at the meeting; the Board was not able to acquire any minutes of this meeting. State Department notes of Secretary Shultz's contemporaneous report of a conversation he had with VADM Poindexter on December 5 in- dicate that VADM Poindexter asked that Secre- tary Shultz's calendar not show the meeting. Recollections of the meeting are quite di- verse. In his meeting with the Board on Janu- ary 26, 1987, the President said he recalled dis- cussing a complex Iranian proposal for weap- ons delivered by the Israelis in installments prior to the release of the hostages. The Presi- dent said that Secretary Shultz and Secretary Weinberger objected to the plan, and that this was the first time he "noted down" their disap- proval. The President said that the discussion at the meeting produced a stalemate. Secretary Weinberger told the Board he argued strongly against the complicated arms and hostages plan, and that he was joined in his opposition by Secretary Shultz. Mr. Regan told the Board that he supported the plan. But notes written that day by the President and State Department notes of Secretary Shultz's contemporaneous report of the meeting indi- cate that Mr. Regan joined Secretary Shultz and Secretary Weinberger in opposing the plan. Whatever disagreements were expressed at the meeting, a consensus emerged that Mr. McFarlane should go to London and deliver a message to the Iranians. ? In October, 1985, the United States obtained reliable evi- dence that William Buckley had died the preceding June. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 No written Presidential decision resulted from the meeting. Immediately after the meet- ing, Mr. McFarlane left for London to meet with Mr. Ghorbanifar and others to discuss the plan. There is no evidence that Mr. McFarlane was given any written instructions for the trip. Mr. McFarlane's message at the London meeting was that, while the United States wanted the U.S. hostages released, and would be interested in better relations with Iran, it was making no offer of arms. According to a memorandum written by LtCol North, Mr. Ghorbanifar refused to transmit this message to his Iranian contacts, reportedly stating that to do so would endanger the lives of the hostages. There appears to be no formal record of the London meeting. Mr. McFarlane reported the results of his trip directly to the President at a meeting held in the Oval Office on December 10. Once again, no analytical paper was distributed in advance, no minutes were kept, and no formal Presiden- tial decision resulted. The President, Secretary Weinberger, Director Casey, Chief of Staff Regan, and VADM Poindexter were present. Secretary Weinberger has no recollection of the meeting though Mr. McFarlane recalled that the Secretary asserted his opposition to the operation. Secretary Shultz was in Europe, but his staff reported to him on the meeting apparently after talking to VADM Poindexter. Mr. McFarlane reported that an impasse in the talks developed when he refused to discuss the transfer of arms to Iran. Mr. McFarlane also told the Board he recommended against any further dealings with Mr. Ghorbanifar or these arms transfers and left government think- ing the initiative had been discontinued. The President also noted on December 9 that Mr. McFarlane had returned from London. He had met with an Iranian agent described as "a devious character." The President noted that the Iranian agent had said that Mr. McFar- lane's message would kill the hostages. The President told the Board at the meeting on De- cember 10, Mr. McFarlane expressed no confi- dence in the Iranian intermediary he met in London [Mr. Ghorbanifar]. The President noted that Mr. McFarlane recommended rejec- tion of the latest plan.8 The President said he agreed. "I had to." Mr. Regan told the Board that at the meeting the President said the United States should try something else or abandon the whole project. Mr. Regan also said that the President noted that it would be another Christmas with hos- tages still in Beirut, and that he [the President] was looking powerless and inept because he was unable to do anything to get the hostages out. Director Casey prepared a memorandum of the meeting dated the same day (December 10). It states that the President "argued mildly" for letting the Israelis sell the equipment but without any commitment from the United States other than replenishment. It reports that the President was concerned that terminating the ongoing discussions could lead to early action against the hostages. Director Casey ended the memorandum by saying that as the meeting broke up: "I had the idea that the President had not entirely given up on encour- aging the Israelis to carry on with the Iranians. I suspect he would be willing to run the risk and take the heat in the future if this will lead to springing the hostages." The Arms/Hostages Link Reestablished. The President was clearly quite concerned about the hostages. Mr. McFarlane told the Board that the President inquired almost daily about the welfare of the hostages. Chief of Staff Regan is reported to have told reporters on November 14, 1986, that "the President brings up the hostages at about 90 percent of his briefings." Mr. Regan is reported to have said that each morning at the daily intelligence briefing, the President asked VADM Poindexter: "John, any- thing new on the hostages?" The premise of the McFarlane December 7 trip had been to try to break the arms/hostage link. However, on December 9, LtCol North submitted to VADM Poindexter a memoran- dum proposing direct U.S. deliveries of arms to Iran in exchange for release of the hostages, using Mr. Secord to.. control Mr. Ghorbanifar and the delivery operation. The December 9 memorandum raises at least a question as to whether LtCol North, who accompanied Mr. McFarlane to the London meeting, fully sup- s This appears to be the plan discussed at the meeting on De- cember 7, 1985. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 ported the thrust of McFarlane's instructions in his own conversations in London with Mr. Ghorbanifar and others. During the rest of December, LtCol North, Mr. Ghorbanifar, Mr. Ledeen, Mr. Secord, and Mr. Nir met variously among themselves. Again we know little of the proceedings. It is not clear who took the lead in developing the arms- for-hostages proposal that was soon presented by the Israelis. It is clear, however, that on Jan- uary 2, 1986, Mr. Nir advanced a proposal just when the initiative seemed to be dying. Mr. Nir met with VADM Poindexter in his office on January 2. Secretary Shultz recalls being told by VADM Poindexter that Mr. Nir proposed an exchange of certain Hizballah prisoners held by Israeli-supported Lebanese Christian forces, together with 3000 Israeli TOWs, for the release of the U.S. citizens held hostage in Beirut. On January 7, 1986, this proposal was discussed with the President at a meeting, probably held in the Oval Office, at- tended by the Vice President, Secretary Shultz, Secretary Weinberger, Attorney General Meese, Director Casey, Mr. Regan, and VADM Poindexter. Although the President apparently did not make a decision at this meeting, several of the participants recall leaving the meeting persuaded that he supported the proposal. Sec- retary Shultz told the Board that the President, the Vice-President, Mr. Casey, Mr. Meese, Mr. Regan, and VADM Poindexter "all had one opinion and I had a different one and Cap shared it." At his meeting with the Board on January 26, 1987, the President said he approved a convo- luted plan whereby Israel would free 20 Hizbal- lah prisoners, Israel would sell TOW missiles to Iran, the five U.S. citizens in Beirut would be freed, and the kidnappings would stop. A draft Covert Action Finding had already been signed by the President the day before the meeting on January 6, 1986. Mr. Regan told the Board that the draft Finding may have been signed in error. The President did not recall signing the January 6 draft. The President told the Board that he had several times asked for assurances that ship- ments to Iran would not alter the military bal- ance with Iraq. He did not indicate when this occurred but stated that he received such assur- ances. The President also said he was warned by Secretary Shultz that the arms sales would undercut U.S. efforts to discourage arms sales by its allies to Iran. The President did not amplify those remarks in his meeting with the Board on February 11. He did add, however, that no one ever dis- cussed with him the provision of intelligence to Iran. On January 17, a second draft Finding was submitted to the President. It was identical to the January 6 Finding but with the addition of the words "and third parties" to the first sen- tence. The President told the Board that he signed the Finding on January 17. It was presented to him under cover of a memorandum from VADM Poindexter of the same date. The Presi- dent said he was briefed on the contents of the memorandum but stated that he did not read it. This is reflected in VADM Poindexter's handwritten note on the memorandum. That note also indicates that the Vice President, Mr. Regan, and Donald Fortier were present for the briefing. Although the draft Finding was virtually identical to that signed by the President on Jan- uary 6, the cover memorandum signaled a major change in the Iran initiative. Rather than accepting the arrangement suggested by Mr. Nir, the memorandum proposed that the CIA purchase 4000 TOWs from DoD and, after re- ceiving payment, transfer them directly to Iran. Israel would still "make the necessary arrange- ments" for the transaction. This was an important change. The United States became a direct supplier of arms to Iran. The President told the Board that he under- stood the plan in this way. That day, President Reagan wrote in his diary: "I agreed to sell TOWs to Iran." It is important to note, however, that this de- cision was made at a meeting at which neither Secretary Shultz, Secretary Weinberger, nor Di- rector Casey were present. Although Secretary Weinberger and Director Casey had been present at a meeting with Attorney General Meese, General Counsel Sporkin, and VADM Poindexter the preceding day to review the draft Finding, the new U.S. role does not appear in the text of the Finding. Attorney General Meese told the Board he did not recall any discussion of the implications of this change. Secretary Weinberger told the Board Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 he had no recollection of attending the meet- ing. The President made the point to the Board that arms were not given to Iran but sold, and that the purpose was to improve the stature within Iran of particular elements seeking ties to the Iranian military. The President distin- guished between selling to someone believed to be able to exert influence with respect to the hostages and dealing directly with kidnappers. The President told the Board that only the latter would "make it pay" to take hostages. The President told the Board that he had not been advised at any time during this period how the plan would be implemented. He said he thought that Israeli government officials would be involved. He assumed that the U.S. side would be on its guard against people such as Mr. McFarlane had met in London in early December. He indicated that Director Casey had not suggested to him at any time that the CIA assume operational responsibility for the initiative, nor was he advised of the downside risks if the NSC staff ran the operation. He re- calls understanding at the time that he had a right to defer notice to Congress, and being concerned that any leaks would result in the death of those with whom the United States sought to deal in Iran. The January 17 Finding was apparently not given or shown to key NSC principals. In par- ticular, Secretary Shultz, Secretary Weinberger, and Mr. Regan stated that they did not see the signed Finding until after the Iran initiative became public. The Finding marked, however, a major step toward increasingly direct U.S. participation in, and control over, the Iran initi- ative. Stage 6: The NSC Staff Manages the Operation In the months that followed the signing of the January 17th Finding, LtCol North forward- ed to VADM Poindexter a number of oper- ational plans for achieving the release of all the hostages. Each plan involved a direct link be- tween the release of hostages and the sale of arms. LtCol North, with the knowledge of VADM Poindexter and the support of selected individuals at CIA, directly managed a network of private individuals in carrying out these plans. None of the plans, however, achieved their common objective-the release of all the hostages. Plans for "Operation Recovery. " The plan de- scribed in the cover memorandum to the Janu- ary 17 Finding called for Israel to arrange for the sale of 4000 U.S. TOW missiles to Iran. The memorandum stated that both sides had agreed that the hostages would be released "immediately" upon commencement of the op- eration. It provided, however, that if all the hostages were not released after the first ship- ment of 1000 TOWS, further transfers would cease. At this point elements of the CIA assumed a much more direct role in the operation. On January 18, 1986, VADM Poindexter and LtCol North met with Clair George, Deputy Director of Operations at CIA, Stanley Sporkin, CIA General Counsel and one of the primary au- thors of the January 17 Finding, the Chief of the Near East Division with the Operations Di- rectorate at CIA. They began planning the exe- cution of the plan. Because of an NSC request for clearance of Mr. Ghorbanifar, on January 11, 1986, the CIA had administered a poly- graph test to Mr. Ghorbanifar during a visit to Washington. Although he failed 'the test, and despite the unsatisfactory results of the pro- gram to date, Mr. Ghorbanifar continued to serve as intermediary. A CIA official recalls Di- rector Casey concurring in this decision. On January 24, LtCol North sent to VADM Poindexter a lengthy memorandum containing a notional timeline for "Operation Recovery." The complex plan was to commence January 24 and conclude February 25. It called for the United States to provide intelligence data to Iran. Thereafter, Mr. Ghorbanifar was to trans- fer funds for the purchase of 1000 TOWs to an Israeli account at Credit Suisse Bank in Geneva, Switzerland. It provided that these funds would be transfered to an account in the same bank controlled by Mr. Secord; that $6 million of that amount would be transferred to a CIA account in that bank; and that the CIA would then wire the $6 million to a U.S. De- partment of Defense account in the United States.9 The 1000 TOWs would then be trans- ferred from the DoD to the CIA. 9 The financing of this and the other transactions involved in the arms sale initiative is covered in the charts annexed to the end of Appendix B. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Mr. Secord and his associates, rather than the CIA, had the more substantial operational role. He would arrange for the shipment of the TOWs to Eilat, Israel. From there, an Israeli 707, flown by a crew provided by Mr. Secord, would deliver the TOWs to Bandar Abbas, Iran. On the return flight, the aircraft would stop in Tehran to pick up the HAWK missiles delivered in November of 1985 but later reject- ed by Iran. The plan anticipated that the next day (February 9) all U.S. citizens held hostage in Beirut would be released to the U.S. embas- sy there. Thereafter, 3000 more TOWS would be delivered. The plan anticipated that Kho- meini would step down on February 11, 1985, the fifth anniversary of the founding of the Is- lamic Republic.' 0 Mr. Ghorbanifar's recollection of the terms of the arrangements are radically different. Mr. Ghorbanifar stated adamantly that the 1000 TOWs were to reestablish U.S. good faith after the disasterous November shipment of HAWK missiles. Mr. Ghorbanifar said there was no agreement that the U.S. hostages would be re- leased as a result of the sale. On February 18, the first 500 TOWs were delivered to Bandar Abbas, and the HAWK missiles were brought out. On February 24-27, LtCol North, a CIA official, Mr. Secord, Mr. Nir, and Mr. Albert Hakim (a business associate of Mr. Secord) held a series of meetings in Frankfurt, Germany with Mr. Ghorbanifar and other Iranians to review the details of the oper- ation. On February 27, the second 500 TOWs were delivered to Bandar Abbas. Although a hostage release and a later meeting between senior U.S. and Iranian officials had been agreed upon at the Frankfurt meeting, the plan fell through. No hostages were released and the meeting failed to materialize until much later. Although the cover memorandum to the Jan- uary 17 Finding stated that further arms trans- fers would cease if all the hostages were not re- leased after delivery of the first 1000 TOWs, the United States continued to pursue the initi- ative and arranged for another delivery of arms two months later. Authorization for "Operation Recovery. " LtCol North appears to have kept VADM Poindexter 10 The Board has found no evidence that would give any cre- dence to this assumption. fully advised of the progress of Operation Re- covery. Director Casey also appears to have been kept informed both by LtCol North and by a CIA official. Both LtCol North and VADM Poindexter were in touch with Mr. McFarlane. In a message to LtCol North on February 27, 1986, Mr. McFarlane noted that he had just re- ceived a note from VADM Poindexter asking whether Mr. McFarlane could undertake the senior level meeting with the Iranians and indi- cating that "the President is on board." Mr. Regan told the Board that the President au- thorized the shipment of 1000 TOWs during one of VADM Poindexter's morning briefings to the President. Secretary Shultz told the Board that on Feb- ruary 28, 1986, VADM Poindexter informed him the hostages would be released the follow- ing week. Secretary Shultz said VADM Poin- dexter reported nothing about arms. VADM Poindexter said that the Iranians wanted a high-level dialogue covering issues other than hostages, and that the White House had chosen Mr. McFarlane for the mission. Preparation for the May Trip. Preparation for a meeting between Mr. McFarlane and senior Ira- nian officials began shortly after LtCol North's return from Frankfurt on February 27. That same day, VADM Poindexter met with Director Casey, Mr. George, and another CIA official to discuss plans for the meeting. On March 5, 1986, George Cave joined the group. He was a retired CIA officer who since retirement had served as a full-time paid consultant to the agency. He was a Farsi speaker and an expert on Iran. LtCol North, Mr. Cave, and a CIA official met with Mr. Ghorbanifar in Paris on March 8, 1986. LtCol North reported on this conversa- tion to Mr. McFarlane on March 10. He said he told Mr. Ghorbanifar that the United States re- mained interested in a meeting with senior Ira- nian officials as long as the hostages were re- leased during or before the meeting. He said he briefed Mr. Ghorbanifar on the Soviet threat to Iran using intelligence supplied by Mr. Robert Gates, then the CIA Deputy Director for Intelligence. Mr. Ghorbanifar responded by presenting a list of 240 different types of spare parts, in various quantities, needed by Iran for its HAWK missile units. He also emphasized the importance of an advance meeting in Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Tehran to prepare for the meeting with Mr. McFarlane. This advance meeting would estab- lish the agenda and who should participate from the Iranian side. While further discussion occurred over the next month, it resulted in little progress. On April 3, 1986, Mr. Ghorbanifar arrived in Washington, D.C. He met with LtCol North, Mr. Allen, Mr. Cave, and another CIA official between April 3-4. In a message to Mr. McFar- lane on April 7, 1986,. LtCol ' North indicated that, at the request of VADM Poindexter, he had prepared a paper for "our boss" laying out the arrangements agreed upon at the meeting. An unsigned, undated memorandum was found in LtCol North's files entitled "Release of American Hostages in Beirut."" It appears to have been prepared in early April. In an interview with Attorney General Meese on November 23, 1986, LtCol North said he prepared this memorandum between April 4-7. Although in a form for transmittal by VADM Poindexter to the President, LtCol North indi- cated that he did not believe the President had approved the memorandum. The memorandum provided for the following sequence of events: -On April 9, the CIA would com- mence procuring $3.641 million worth of parts for HAWK missile units. -On April 18, a private U.S. aircraft would load the parts and fly them to an Israeli airfield. The parts would then be transferred to an Israeli mili- tary aircraft with false markings. -On April 19, Mr. McFarlane, LtCol North, Mr. Teicher, Mr. Cave, and a CIA official would board a CIA aircraft in Frankfurt en route to Tehran. -On April 20, they would meet with a delegation of senior Iranian officials. Seven hours later, the U.S. hostages would be released in Beirut. Fifteen hours later, the Israeli military aircraft with the HAWK missile parts would land in Bandar Abbas, Iran. That schedule was not met. On April 16, 1986, LtCol North wrote VADM Poindexter ' 1 This memorandum also contained a reference to the diver- sion of funds to the Contras, discussed in Section B of this Part III. seeking approval for a meeting with Mr. Ghor- banifar in Frankfurt on April 18. In his reply of the same date, VADM Poindexter approved the trip but insisted that there be no delivery of parts until all the hostages had been freed. He expressly ruled out half shipments before re- lease. "It is either all or nothing." He author- ized LtCol North to tell Mr. Ghorbanifar: "The President is getting very annoyed at their con- tinual stalling." On April 21, VADM Poindexter sent a message to Mr. McFarlane informing him of this position. The Frankfurt meeting was not held. On May 6, 1986, LtCol North and Mr. Cave met with Mr. Ghorbanifar in London. Mr. Ghorbanifar promised a meeting with senior Iranian officials but asked that the U.S. delegation bring all the HAWK spare parts with them. Mr. Cave recalls the Americans agreeing that one-quarter of the spare parts would accompany the delegation. Notwithstanding, LtCol North informed VADM Poindexter on May 8: "I believe we have suc- ceeded. * * * Release of hostages set for week of 19 May in sequence you have specified." On May 22, 1986, LtCol North submitted the final operating plan for the trip to VADM Poin- dexter. It provided that the McFarlane delega- tion would arrive in Tehran on May 25, 1986. The next day (but no later than May 28), the hostages would be released. One hour later, an Israeli 707 carrying the balance of the spare parts would leave Tel Aviv for Tehran. Authorization for the May Trip. On May 3, 1986, while at the Tokyo economic summit, Secretary Shultz received word from the U.S. Ambassa- dor to London that Mr. Khashoggi, Mr. Ghor- banifar, and Mr. Nir had sought to interest a British businessman in the shipment of spare parts and weapons to Iran. That same day, Sec- retary Shultz expressed his concern about any such transaction to Mr. Regan. Secretary Shultz told the Board that Mr. Regan said he was alarmed and would talk to the President. Secre- tary Shultz said he talked later to VADM Poin- dexter and was told that "that was not our deal." He recalls being told soon thereafter by both VADM Poindexter and Director Casey that the operation had ended and the people involved had been told ' to "stand down." The Tokyo Summit closed with a statement from all the heads of state strongly reaffirming their 111-15 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 condemnation of international terrorism in all its forms. Rodney McDaniel noted that during the na- tional security briefing on May 12, 1986, VADM Poindexter discussed with the President the hostages and Mr. McFarlane's forthcoming trip.12 The notes indicate that the President di- rected that the press not be told about the trip. On May 15, 1986, Mr. McDaniel's notes indi- cate that the President authorized Mr. McFar- lane's secret mission to Iran and the Terms of Reference for that trip. Those notes indicate that the trip was discussed again with the Presi- dent on May 21. On May 17, LtCol North "strongly urged" that VADM Poindexter include Secretary Shultz and Secretary Weinberger along with Director Casey in a "quiet" meeting with the President and Mr. McFarlane to review the proposed trip. VADM Poindexter responded, "I don't want a meeting with RR, Shultz and Weinberger." The May Trip to Tehran. LtCol North noted in a message to VADM Poindexter on May 19 that CIA was providing "comms, beacons, and doc- umentation for the party." All the other logis- tics had been arranged through Mr. Secord "or affiliates." Mr. McFarlane, along with LtCol North, Mr. Cave, and a CIA official, left the United States on May 23. Mr. Nir had pressed to be included in the delegation. The Chief of the Near East Division in the CIA operations directorate told the Board that this request was initially rejected, and that position was trans- mitted by the White House to Israeli Prime Minister Peres who appealed it. He said that ul- timately, the decision was left to Mr. McFar- lane, who decided to let Mr. Nir join the group. Mr. Ghorbanifar recalls that in meetings with Iranian officials, Mr. Nir was always presented as an American. On May 25 the delegation arrived in Tehran. Without the prior knowledge to Mr. McFarlane, the aircraft carried one pallet of HAWK spare parts. The delegation was not met by any senior Iranian officials. No hostages were re- leased. Because of this, a second plane carrying the rest of the HAWK spare parts was ordered not to come to Tehran. Two days of talks 12 Mr. McDaniel became Executive Secretary of the NSC in February, 1986. Though uninvolved in both the policy and im- plementation of the Iran initiative, Mr. McDaniel accompanied VADM Poindexter to his morning briefings of the President as a note taker. proved fruitless. The Iranians initially raised demands for additional concessions, but later appeared to abandon them. Mr. McFarlane de- manded the prior release of all hostages and the Iranians insisted on the immediate delivery of all HAWK spare parts. On May 27, Mr. McFarlane demanded the release of the hos- tages by 6:30 a.m. the next day. When no hos- tages were released, Mr. McFarlane and his party departed, but not before the pallet of HAWK spare parts had been removed from their aircraft by the Iranians. In a report to VADM Poindexter on May 26, Mr. McFarlane stated: "The incompetence of the Iranian government to do business requires a rethinking on our part of why there have been so many frustrating failures to deliver on their part." Mr. Ghorbanifar placed blame for the failure of the May trip squarely on the United States. Mr. Ghorbanifar said that he had proposed that he and LtCol North go to Tehran first to pre- pare the way. But after Mr. Ghorbanifar had made all the arrangements, LtCol North ad- vised that VADM Poindexter had disapproved the trip. The failure to hold this preparatory meeting may have resulted in substantial mis- understanding between the two sides as to just what would occur and be discussed at the meeting with Mr. McFarlane. Mr. Ghorbanifar stated that the Iranians failed to meet Mr. McFarlane's plane because it arrived three hours ahead of schedule. Mr. Ghorbanifar also claimed that the delegation did meet with a senior-level foreign policy advisor. The Board found evidence that LtCol North, Mr. Cave, Mr. Allen, and another CIA official knew as early as mid-April that if all the HAWK spare parts were not delivered with the delega- tion, then only one U.S. hostage would be re- leased. Mr. McFarlane may not have been ad- vised of this. While in Tehran, he insisted upon the release of all U.S. hostages prior to more than the token delivery of HAWK spare parts. This was apparently his and VADM Poin- dexter's understanding of the agreed arrange- ments. This led Mr. McFarlane to refuse an even better Iranian offer than the one LtCol North and his associates had reason to expect: two hostages immediately and the remaining two after delivery of the rest of the .spare parts. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Notes made by Mr. McDaniel indicate that on May 27 the President received a report on the McFarlane trip. Those notes also indicate that Mr. McFarlane reported on his trip in person to the President on May 29. The notes indicate that the Vice President, Mr. Regan, VADM Poindexter, Mr. Teicher, and LtCol North also attended. Mr. McFarlane told the Board, and the notes confirm, that he told the President that the program ought to be discontinued. It was his view that while political meetings might be considered, there should be no weapons transfers. A Hostage Comes Out. Mr. McDaniel's notes in- dicate that on June 20, 1986, the President de- cided that no further meeting with the Iranians would be held until the release of the hostages. Early in July, LtCol North called Charles Allen, a CIA official, and asked him to take over the day-to-day contact with Mr. Nir. LtCol North wrote in a memorandum to VADM Poindexter about this same time that he believed he had "lost face" because of his failure to obtain the release of an American hostage. Mr. Allen re- called that Mr. Nir was alarmed at losing direct contact with LtCol North. Mr. Allen told the Board that as a result, Mr. Nir worked closely with Mr. Ghorbanifar to obtain the release of an American hostage. Notes made by the NSC Executive Secretary indicate that on July 18, VADM Poindexter in- formed the President of the latest communica- tions with the Iranian interlocutors. On July 21, LtCol North, Mr. Cave, and Mr. Nir met with Mr. Ghorbanifar in London. They discussed the release of the hostages in exchange for the HAWK spare parts that remained undelivered from the May mission to Tehran. On July 26, Father Lawrence Jenco was released. VADM Poindexter briefed the President on the Jenco release that same day over a secure telephone. He used a memorandum prepared by LtCol North that claimed the release was "undoubtedly" a result of Mr. McFarlane's trip in May and the continuing contacts thereafter. A July 26, 1986 memorandum to VADM Poin- dexter from Director Casey reached the same conclusion. In a memorandum to VADM Poindexter dated July 29, 1986, LtCol North recommend- ed that the President approve the immediate shipment of the rest of the HAWK spare parts and a follow-up meeting with the Iranians in Europe. Notes of the NSC Executive Secretary indicate that the President approved this pro- posal on July 30. Additional spare parts were delivered to Tehran on August 3. Stage 7: The Second Channel Is Opened But the Initiative Leaks From the start, U.S. officials had stressed to Mr. Ghorbanifar that Iran must use its influ- ence to discourage further acts of terrorism di- rected against the United States and its citizens. Whether as a result of those efforts or for some other reason, from June 9, 1985, until Septem- ber 9, 1986, no U.S. citizen was seized in Leba- non.13 But on September 9, 1986, terrorists seized Frank Reed, a U.S. educator at the Leba- nese International School. Two more U.S. citi- zens, Joseph Cicippio and Edward Tracey, were taken hostage on September 12 and October 21. The McFarlane mission to Tehran marked the high-water mark of U.S. efforts to deal with Iran through Mr. Ghorbanifar. For a year he had been at the center of the relationship. That year had been marked by great confusion, broken promises, and increasing frustration on the U.S. side. LtCol North and other U.S. offi- cials apparently blamed these problems more on Mr. Ghorbanifar than on Iran. The release of Rev. Jenco did little to mitigate their unhap- piness. Sometime in July, 1986, an Iranian living in London proposed to Mr. Hakim a second Irani- an channel-the relative of a powerful Iranian official. On July 25, Mr. Cave went to London to discuss this possibility. On August 26, 1986, Mr. Secord and Mr. Hakim met with the second channel and other Iranians in London. The Ira- nians said they were aware of the McFarlane visit, the Israeli connection, and Mr. Ghorbani- far's role. They referred to Mr. Ghorbanifar as a "crook." Notes taken by Mr. McDaniel indi- cate that the President was briefed about the second channel on September 9, 1986. LtCol North, Mr. Cave, and a CIA official met with the second channel and two other Ira- nians in Washington between September 19 and 21, 1986. The two sides discussed the Soviet threat, cooperation in support of the 's This excludes two and possibly three dual-national U.S. citi- zens seized during this period. 173-298 0-87-2 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Afghan resistance, and improved relations be- tween the United States and Iran. The bulk of the time, however, was spent discussing the "obstacle'.' of the hostages and Iran's urgent need (within two months) for both intelligence and weapons to be used in offensive operations against Iraq. LtCol North reviewed a list of military equipment and agreed "in principle" to provide that equipment, subject to the con- straints of what was available within the United States or obtainable from abroad. The parties discussed the establishment of a secret eight- man U.S.-Iranian commission to work on future relations. Finally, LtCol North told the Iranians that unless contact came from North, Richard Secord, or George Cave, "there is no official message from the United States." Notes by Mr. McDaniel indicate that on September 23, the President was briefed on recent discussions with the second channel. On October 5-7, 1986, LtCol North, Mr. Cave, and Mr. Secord met with the second channel in Frankfurt, Germany. They carried a Bible for the Iranians inscribed by the Presi- dent on October 3. During the meeting, LtCol North misrepresented his access to the Presi- dent and attributed to the President things the President never said. In presenting the Bible, LtCol North related the following story to the Iranians: "We inside our Government had an enormous debate, a very angry debate inside our government over whether or not my president should authorize me to say "We accept the Islamic Rev- olution of Iran as a fact * * *." He [the President] went off one whole weekend and prayed about what the answer should be and he came back almost a year ago with that passage I gave you that he wrote in front of the Bible I gave you. And he said to me, "This is a promise that God gave to Abraham. Who am I to say that we should not do this?" In reality, the idea of the Bible and the choice of the inscription were contained in an October 2, 1986, memorandum from LtCol North to VADM Poindexter. The Bible was to be exchanged for a Koran at the October 5-7 meeting. VADM Poindexter approved the idea and the President inscribed the Bible the next morning. The President told the Board that he did inscribe the Bible because VADM Poin- dexter told him this was a favorite passage with one of the people with whom the U.S. was dealing in Iran. The President said he made the inscription to show the recipient that he was "getting through." At two points during the October 5-7 Frank- furt meetings, LtCol North told two stories of private discussions with the President at Camp David. The first had the President saying that he wanted an end to the Iran/Iraq war on terms acceptable to Iran. The second had the President saying that the Gulf states had to be convinced that it was Saddam Husain of Iraq that was "causing the problem." When pressed by the Iranians for an explicit statement of what the United States means by "an honorable victory" for Iran, LtCol North replied: "We also recognize that Saddam Husain must go." The President emphasized to the Board that these statements are an "absolute fiction" and that there were no meetings as LtCol North de- scribes. In addition, Mr. McDaniel noted that on October 3, 1986, the President reaffirmed that the United States wanted neither Iran or Iraq to win the war. At the October 5-7 meeting, LtCol North laid out a seven-step proposal for the provision of weapons and other items in exchange for Iranian influence to secure the release of all re- maining U.S. hostages, the body of William Buckley, a debrief by his captors, and the re- lease of John Pattis, a United States citizen whom the Iranians had arrested on spying charges several months earlier. The Iranians presented a six-point counter-proposal that, in part, promised the release of one hostage fol- lowing receipt of additional HAWK parts and a timetable for future delivery of intelligence in- formation. The Iranians made clear that they could not secure the release of all the hostages. Mr. Cave recalls that the Iranians proposed ex- changing 500 TOWs for the release of two hos- tages. He stated that the U.S. side agreed. A second meeting was held in Frankfurt on October 26-28 at which the parties finalized the payment and delivery schedule for the TOWs. At that meeting, the parties apparently discussed a nine-point U.S. agenda with Iran. That agenda included delivery by the U.S. of Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 the 500 TOWs, an unspecified number of HAWKs, discussion of the 17 Da'Wa prisoners held by Kuwait, additional arms including 1000 more TOWs, and military intelligence. In ex- change the Iranians promised release of one and perhaps two U.S. citizens held hostage in Beirut and "further efforts to create the condi- tion for release of other hostages." At a meeting between representatives of the State Department and the second channel on December 13, 1986, the Iranian said that both sides had agreed to this nine-point agenda. The Board found no evidence that LtCol North had authority to agree to such an agenda. Sec- retary Shultz told the Board that he informed the President the next day. He said that the President was "stricken" and could not believe anything like this had been discussed. Of par- ticular concern was the point that the United States had consistently given strong support to Kuwait in resisting terrorist demands for the release of the Da'Wa prisoners. At the October 26-28 meeting, the Iranian participants said the story of the McFarlane mission to Tehran had been published in a small Hezbollah newspaper in Baalbek, Leba- non. The article was based on a series of leaf- lets distributed in Tehran on 15 or 16 October. Mr. Regan recalls the President authorizing the shipment of 500 TOWs on October 29, 1986. Because of a delay in the transfer of funds the TOWs actually delivered to Iran on Octo- ber 29, 1986, were Israeli TOWs. The 500 U.S. TOWs were provided to Israel as replacements on November 7. On November 2, hostage David Jacobsen was released. The next day, a pro-Syrian Beirut magazine published the story of the McFarlane mission. On November 4, Majlis Speaker Raf- sanjani publicly announced the mission. The President, VADM Poindexter, and LtCol North hoped that more hostages would be re- leased. Notes taken by the NSC Executive Sec- retary indicate that on November 7, 1986, the President decided not - to respond to questions on this subject for fear of jeopardizing the re- maining hostages. No further hostages were re- leased. Mr. Ghorbanifar told the Board that the switch to the second channel was a major error. He claimed that he had involved all three major lines or factions within the government of Iran in the initiative, and that the second channel involved only the Rafsanjani faction thus stimulating friction among the factions and leading to the leak of the story to embar- rass Rafsanjani. In addition, the price offered to this faction was lower ($8000 per TOW) than the price charged for the earlier TOW de- liveries ($10000 per TOW). . Section B: Contra Diversion Sizable sums of money generated by the arms sales to Iran remain unaccounted for. De- termining whether these funds from the sale of arms to Iran were diverted to support the Con- tras proved to be extremely difficult. VADM Poindexter, LtCol North, Israeli participants, and other key witnesses refused to appear before the Board, and records for relevant bank accounts maintained in Switzerland and elsewhere could not be obtained by the Board. Notwithstanding, there was considerable evi- dence before the Board of a diversion to sup- port the Contras. But the Board had no hard proof. Early in 1986, the need to find funds for the support of the Contras was desperate. At the same time, the idea of diverting funds from the arms sales to Iran surfaced. Attorney General Meese told the Board that VADM Poindexter and LtCol North both told him that a diversion had occurred. Money Was Available. Israel made three arms deliveries to Iran in 1985. One of these was the November shipment of HAWK missiles. After the November deal collapsed, 17 of the 18 HAWK missiles were returned to Israel and available evidence suggests that all of the money for that shipment was returned or cred- ited to Iran. In the case of the TOW shipments in August and September 1985, the price charged to Iran by Israel was far in excess of what Israel paid the U.S. Department of De- fense to replenish the arms it delivered. This excess amount was roughly $3 million for the August/September TOW shipments. Nothing is known by the Board about the disposition of those funds. The United States directly managed four arms deliveries in 1986. In each case, the pur- chase money was deposited in Swiss bank ac- counts held in the name of Lake Resources and Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 under the control of Richard Secord. Again, the price charged to Iran was far in excess of what was paid to the Department of Defense for the arms. The excess amounts totaled almost $20 million for the four deliveries: $6.3 million for the February shipment of TOWs, $8.5 million for the May and August shipments of HAWK parts, and $5 million for the October shipment of TOWs.14 Most of these monies remain unaccounted for. Mr. Khashoggi and other investors claim they are still owed $10 million from these transactions. The Contras Desperately Needed Funds. In Janu- ary, 1986, the President requested $100 million in military aid to the Contras. The request re- vived the often bitter Congressional debate over whether the United States should support the Contras. The obligational authority for the $27 million in humanitarian aid to the Contras approved by the Congress in 1985 would expire on March 31, 1986. LtCol North, who had primary NSC staff responsibility for mat- ters relating to the Contras, became increasing- ly concerned. While anticipating Congressional approval of the President's January 1 request, LtCol North feared the Contras would run out of funds before then. On April 22, 1986, he wrote Mr. Fortier: "[T]he picture is dismal unless a new source of `bridge' funding can be identified * * *. We need to explore this prob- lem urgently or there won't be a force to help when the Congress finally acts." A Diversion Was Suggested. It is unclear who first suggested the idea of diverting funds from the arms sales to Iran to support the Contras. The evidence suggests that the idea surfaced early in 1986. Attorney General Meese told the Board that during his interview with LtCol North on No- vember 23, 1986, North indicated that the idea surfaced during a discussion with Mr. Nir in January, 1986, about ways Israel could help the Contras. LtCol North recalled the Israeli offi- cial suggesting that the "residuals" from the Iran arms sales be transferred to the Contras. Contemporaneous Justice Department notes of the November interview indicate that LtCol North said the diversion was an Israeli idea; that the Israelis wanted to be helpful. "'Charts describing the various arms sales transactions in- volved in the initiative are annexed to Appendix B. Mr. Ghorbanifar told the Board that he had a conversation with LtCol North and Mr. Secord sometime in February of 1986 concerning ar- rangements for the upcoming delivery of 1000 TOW missiles to Iran. He said that LtCol North and Mr. Secord were extremely worried about a shortfall in funding for the Contras. Mr. Ghorbanifar said that LtCol North asked him if the Iranians would pay $10,000 per TOW missile, instead of $6,500. When told that Iran would pay that price, Mr. Ghorbanifar said LtCol North was greatly relieved-"he was a changed man." In a memorandum of a meeting with Mr. Ghorbanifar in Paris on March 7-8, George Cave reported. that Mr. Ghorbanifar, in an aside, "proposed that we use profits from these deals and others to fund support to the rebels in Afghanistan. We could do the same with Nicaragua." Before the Board, Mr. Cave said that neither he nor Mr. Ghorbanifar made any mention of diversion. North and Poindexter Said Diversion Occurred. At- torney General Meese told the Board that during his interview with LtCol North on No- vember 23, 1986, North said that $3 to $4 mil- lion was diverted to the support of the Contras after the February shipment of TOW missiles and that more (though how much LtCol North was not sure) was diverted after the May ship- ment of HAWK parts. Contemporaneous Jus- tice Department staff notes of that interview in- dicate that LtCol North said that the Israelis handled the money and that he gave them the numbers of three accounts opened in Switzer- land by Adolpho Calero, a Contra leader. The notes also indicate that LtCol North said there was no money for the Contras as a result of the shipment in October, 1986. By then Congres- sional funding had resumed. Mr. McFarlane testified that while standing on the tarmac at a Tel Aviv airport after the trip to Tehran in May of 1986, LtCol North told him not to be too downhearted because "this government is availing itself of part of the money [from the Iran initiative] for application to Central America." Assistant Secretary of De- fense Richard Armitage told the Board that North told him sometime in November of 1986 that: "it's going to be just fine * * * as soon as Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 everyone knows that * * * the Ayatollah is helping us with the Contras." Authorization. It is unclear whether LtCol North ever sought or received prior approval of any diversion of funds to the support of the Contras. LtCol North prepared in early April an unsigned memorandum entitled "Release of American Hostages in Beirut," which sought Presidential approval for what became Mr. McFarlane's May trip to Tehran. In that memo, LtCol North stated that $12 million in "residu- al" funds from the transaction would "be used to purchase critically needed supplies for the Nicaraguan Democratic Resistance Forces." No evidence has emerged to suggest that this memorandum was ever placed before VADM Poindexter, the President, or any other U.S. of- ficial. As a general matter, LtCol North kept VADM Poindexter exhaustively informed about his activities with respect to the Iran initiative. Although the Board did not find a specific communication from Lt. Col North to VADM Poindexter on the diversion question, VADM Poindexter said that he knew that a diversion had occurred. Mr. Regan told the Board that he asked VADM Poindexter on November 24, 1986, if he knew of LtCol North's role in a di- version of funds to support the Contras. VADM Poindexter replied that, "I had a feeling that something bad was going on, but I didn't in- vestigate it and I didn't do a thing about it. * * * I really didn't want to know. ' I was so damned mad at Tip O'Neill for the way he was dragging the Contras around I didn't want to know what, if anything, was going on. I should have, but I didn't." Attorney General Meese told the Board that after talking to LtCol North, he asked VADM Poindexter what he knew about the diversion. "He said that he did know about it * * * Ollie North had given him enough hints that he knew what was going on, but he didn't want to look further into it. But that he in fact did generally know that money had gone to the Contras as a result of the Iran shipment." The President said he had no knowledge of the diversion prior to his conversation with At- torney General Meese on November 25, 1986. No evidence has come to light to suggest oth- erwise. Contemporaneous Justice Department staff notes of LtCol North's interview with At- torney General Meese on November 23, 1986, show North telling the Attorney General that only he, Mr. McFarlane, and VADM Poindexter were aware of the diversion. Section C: The NSC Staff and Support for the Contras Inquiry into the arms sale to Iran and the possible diversion of funds to the Contras dis- closed evidence of substantial NSC staff in- volvement in a related area; private support for the Contras during the period that support from the U.S. Government was either banned or restricted by Congress. There are similarities in the two cases. Indeed, the NSC staffs role in support for the Contras set the stage for its subsequent role in the Iran initiative. In both, LtCol North, with the acquiescence of the National Security Advi- sor, was deeply involved in the operational de- tails of a covert program. He relied heavily on private U.S. citizens and foreigners to carry out key operational tasks. Some of the same indi- viduals were involved in both. When Israeli plans for the November HAWK shipment began to unravel, LtCol North turned to the private network that was already in place to run the Contra support operation. This network, under the direction of Mr. Secord, undertook increasing responsibility for the Iran initiative. Neither program was subjected to rigorous and periodic inter-agency overview. In neither case was Congress informed. In the case of Contra support, Congress may have been actively misled. These two operations also differ in several key aspects. While Iran policy was the subject of strong disagreement within the Executive Branch, the President's emphatic support for the Contras provoked an often bitter debate with the Congress. The result was an intense political struggle between the President and the Congress over how to define U.S. policy toward Nicaragua. Congress sought to restrict the President's ability to implement his policy. What emerged was a highly ambiguous legal environment. On December 21, 1982, Congress passed the first "Boland amendment" prohibiting the De- partment of Defense and , the Central Intelli- gence Agency from spending funds to over- throw Nicaragua or provoke conflict between Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Nicaragua and Honduras. The following year, $24 million was authorized for the Contras. On October 3, 1984, Congress cut off all funding for the Contras and prohibited DoD, CIA, and any other agency or entity "involved in intelli- gence activities" from directly or indirectly sup- porting military operations in Nicaragua. The 1984 prohibition was subject to conflict- ing interpretation. On the one hand, several of its Congressional supporters believed that the legislation covered the activities of the NSC staff. On the other hand, it appears that LtCol North and VADM Poindexter received legal advice from the President's Intelligence Over- sight Board that the restrictions on lethal as- sistance to the Contras did not cover the NSC staff. Confusion only increased. In December 1985 Congress approved classified amounts of funds to the Contras for "communications" and "advice." The authorization was subject, how- ever, to a classified annex negotiated by the Senate and House intelligence committees. An exchange of letters, initiated the day the law passed, evidences the extreme difficulty even the Chairmen of the two committees had in de- ciding what the annex permitted or proscribed. The support for the Contras differs from the Iranian initiative in some other important re- spects. First, the activities undertaken by LtCol North with respect to the Contras, unlike in the Iranian case, were in support of the declared policy of at least the Executive. Second, the President may never have authorized or, indeed, even been apprised of what the NSC staff was doing. The President never issued a Covert Action Finding or any other formal de- cision authorizing NSC staff activities in sup- port of the Contras. Third, the NSC staff's role in support of the Contras was not in deroga- tion of the CIA's role because, CIA involve- ment was expressly barred by statute. The Board had neither the time nor the re- sources to conduct a full inquiry into the role of the NSC staff in the support of the Contras that was commensurate with its work on the Iran arms sales. As a consequence, the evi- dence assembled by the Board was somewhat anecdotal and disconnected. The most signifi- cant evidence is summarized in this Section C. A fuller treatment is contained in Appendix C. The Bid for Private Funding. Because of Con- gressional restrictions, the Executive Branch turned to private sources to sustain the Contras militarily. In 1985 and 1986, Mr. McFarlane and the NSC staff repeatedly denied any direct involvement in efforts to obtain funds from these sources. Yet evidence before the Board suggests that LtCol North was well aware of these efforts and played a role in coordinating them. The extent of that role remains unclear. In a memorandum to Mr. McFarlane dated April 11, 1985, LtCol North expressed concern that remaining Contra funds would soon be in- sufficient. He advised that efforts be made to seek $15 to $20 million in additional funds from the current donors which will "allow the force to grow to 30-35,000." The exact pur- pose to which these private funds were to be put was unambiguous. A number of memoran- da from LtCol North make clear that the funds were for munitions and lethal aid. Asked by the Board about the source of such funds, Mr. McFarlane provided a written re- sponse that indicated that "without solicita- tion" a foreign official offered $1 million a month from what he described as "personal funds." At Mr. McFarlane's request, LtCol North provided the numbers of a Contra bank account in Miami. Mr. McFarlane wrote that in 1985, the foreign official doubled his contribu- tion to $2 million a month, a fact confirmed by two other U.S. officials. Contributions appear to have been channeled through a series of non-profit organizations that LtCol North apparently had a hand in or- ganizing. A diagram found in LtCol North's safe links some of these organizations to bank accounts controlled by Richard Secord and others known to be involved in purchasing and shipping arms to the Contras. Other documents and evidence suggest that private contributions for the Contras were eventually funnelled into "Project Democra- cy," 15 a term apparently used by LtCol North "'We have no information linking the activities described herein as "Project Democracy" with the National Endowment for Democracy (NED). The latter was created in 1983 by Congres- sional act and is funded by legislation. Its purpose is to strength- en democratic institutions around the world through private, non-governmental efforts. NED grew out of an earlier Adminis- tration public initiative to promote democracy around the world, which came to be known as "Project Democracy". It appears that North later adopted the term to refer to his own covert oper- ations network. We believe this is the only link between the NED and North's activities. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 to describe a network of secret bank accounts and individuals involved in Contra resupply and other activities. In a message to VADM Poindexter dated July 15, 1986, LtCol North described "Project Democracy" assets as worth over $4.5 million. They included six aircraft, warehouses, supplies, maintenance facilities, ships, boats, leased houses, vehicles, ordnance, munitions, communications equipment, and a 6520-foot runway. The runway was in fact a secret airfield in Costa Rica. LtCol North indi- cated in a memorandum dated September 30, 1986, that the airfield was used for direct re- supply of the Contras from July 1985 to Febru- ary 1986, and thereafter as the primary abort base for damaged aircraft. On September 9, 1986, following Costa Rica's decision to close the airfield, LtCol North received word that the Costa Rican gov- ernment was planning to call a press confer- ence to announce the existence of the airfield. The same day, LtCol North informed VADM Poindexter that he had held a conference call with then U.S. Ambassador to Costa Rica, Louis Tambs, and Assistant Secretary Elliott Abrams to discuss the potential public revela- tion of the airfield. All three participants con- firm the conference. North said that they had decided North would call Costa Rican President Arias and tell him if the press conference went forward the U.S. would cancel $80 million in promised A.I.D. assistance and Arias' upcoming visit with President Reagan. North added that both Ambassador Tambs and Assistant Secre- tary Abrams reinforced this message with Arias. VADM Poindexter replied: "You did the right thing, but let's try to keep it quiet." Assistant Secretary Abrams and Ambassador Tambs told the Board that the conference call took place, but only Tambs was instructed to call Arias and that no threat to withhold U.S. assistance was made. They each doubted that North ever called the President of Costa Rica on this matter. The Costa Rican Government later announced the discovery and closure of the airfield. Coordinating the Resupply Operation. The CIA Headquarters instructed its field stations to "cease and desist" with action which can be construed to be providing any type of support either direct or indirect to the various entities with whom we dealt under the program. The Chief of the CIA Central American Task Force added that in other respects the interagency process on Central America was in disarray in October 1984 and that "it was Ollie North who then moved into -that void and was the focal point for the Administration on Central Ameri- can policy until fall 1985." As early as April 1985, LtCol North main- tained detailed records of expenditures for Contra military equipment, supplies, and oper- ations. On April 11, 1985, LtCol North sent a memorandum to Mr. McFarlane describing two sealifts and two airlifts "[a]s of April 9, 1985." The memorandum set out the kind of munition purchased, the quantity, and in some instances the cost. LtCol North also noted that from July 1984 to April 9, 1985: "$17,145,594 has been expended for arms, munitions, combat oper- ations, and support activities." Evidence suggests that at least by November 1985, LtCol North had assumed a direct oper- ational role, coordinating logistical arrange- ments to ship privately purchased arms to the Contras. In a note to Poindexter on November 22, 1985, he described a prospective delivery as "our first direct flight (of ammo) to the resist- ance field [in] Nicaragua." This shipment was delayed when Mr. Secord was asked to use the aircraft instead to deliver the 18 HAWK mis- siles to Iran in November, 1985. In 1986, North established a private secure communications network. North received 15 encryption devices from the National Security Agency from January to March 1986, provided in support of his counter-terrorist activities. One was provided to Mr. Secord and another, through a private citizen, to a CIA field officer posted in Central America. Through this mech- anism, North coordinated the resupply of the Contras with military equipment apparently purchased with funds provided by the network of private benefactors. The messages to LtCol North from Mr. Secord and the CIA officer: (a) asked him to direct where and when to make Contra munitions drops; (b) informed him of arms requirements; and (c) apprised him of payments, balances, and deficits. At least nine arms shipments were coordinat- ed through this channel from March through June, 1986. The CIA field officer in Costa Rica outlined his involvement in the resupply net- work and described the shipments: "This was all lethal. Benefactors only sent lethal stuff." Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 The CIA officer added that the private benefac- tor operation was, according to his understand- ing, controlled by LtCol North. ' Mr. Secord was in charge of arranging the actual deliveries, using at least in part Southern Air Transport ("SAT"). Assistant Commission- er William Rosenblatt told the Board that LtCol North contacted him after a SAT C-123 aircraft crashed in Nicaragua, prompting a Cus- toms investigation. North. told him that the Customs investigation was focused on "good guys" who committed "no crimes." The Cus- toms Service then narrowed the investigation to the specific aircraft involved in the crash rather than on the activities of the whole com- pany. U.S. Customs Commissioner William von Rabb said that LtCol North had previously con- tacted him to complain that Custom's agents were conducting an investigation involving a Maule aircraft. A former CIA officer in Central America said that at least one Maule aircraft was used in support of the Contra forces. Mr. Rosenblatt and Mr. von Raab told the Board that LtCol North never asked them to close out their investigations. The Board obtained evi- dence that at least one Maule aircraft was used in Contra military operations. This evidence was referred to the. Independent Counsel._ Authorization. The evidence before the Board contained no record that LtCol North's role to support the Contras.- was formally authorized. It appears, however, that LtCol North did keep the National Security Advisor informed, first Mr. McFarlane and then VADM Poindexter. It is not clear to what extent other NSC principals or their departments were informed. On May 15, 1986, VADM Poindexter cautioned North: "From now on, I don't want you to talk to any- body else, including Casey, except me about any of your operational roles." The President told the Board on January 26, 1987, that he did not know that the NSC staff was engaged in helping the Contras. The Board is aware of no evidence to suggest that the President was aware of LtCol North's activi- ties. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 What Was Wrong The arms transfers to Iran and the activities of the NSC staff in support of the Contras are case studies in the perils of policy pursued out- side the constraints of orderly process. The Iran initiative ran directly counter to the Administration's own policies on terrorism, the Iran/Iraq war, and military support to Iran. This inconsistency was never resolved, nor were the consequences of this inconsistency fully considered and provided for. The result taken as a whole was a U.S. policy that worked against itself. The Board believes that failure to deal ade- quately with these contradictions resulted in large part from the flaws in the manner in which decisions were made. Established proce- dures for making national security decisions were ignored. Reviews of the initiative by all the NSC principals were too infrequent. The initiatives were not adequately vetted below the cabinet level. Intelligence resources were un- derutilized. Applicable legal constraints were not adequately addressed. The whole matter was handled too informally, without adequate written records of what had been considered, discussed, and decided. This pattern persisted in the implementation of the Iran initiative. The NSC staff assumed direct operational control. The initiative fell within the traditional jurisdictions of the De- partments of State, Defense, and CIA. Yet these agencies were largely ignored. Great reli- ance was placed on a network of private opera- tors and intermediaries. How the initiative was to be carried out never received adequate at- tention from the NSC principals or a tough working-level review. No periodic evaluation of the progress of the initiative was ever conduct- ed. The result was an unprofessional and, in substantial part, unsatisfactory operation. In all of this process, Congress was never no- tified. As noted in Part III, the record of the role of the NSC staff in support of the Contras is much less complete. Nonetheless, what is known suggests that many of the same prob- lems plagued that effort as well. The first section of this Part IV discusses the flaws in the process by which conflicting poli- cies were considered, decisions were made, and the initiatives were implemented. The second section discusses the responsibil- ity of the NSC principals and other key national security officials for the manner in which these initiatives were handled. The third section discusses the special prob- lem posed by the role of the Israelis. The fourth section of this Part IV outlines the Board's conclusions about the management of the initial public presentation of the facts of the Iran initiative. A. A Flawed Process 1. Contradictory Policies Were Pursued. -The arms sales to Iran and the NSC support for the Contras demonstrate the risks involved when highly controversial initiatives are pursued cov- ertly. Arms Transfers to Iran.-The initiative to Iran was a covert operation directly at odds with im- portant and well-publicized policies of the Ex- ecutive Branch. But the initiative itself em- bodied a fundamental contradiction. Two ob- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 jectives were apparent from the outset: a strate- gic opening to Iran, and release of the U.S. citi- zens held hostage in Lebanon. The sale of arms to Iran appeared to provide a means to achieve both these objectives. It also played into the hands of those who had other inter- ests-some of them personal financial gain-in engaging the United States in an arms deal with Iran. In fact, the sale of arms was not equally ap- propriate for achieving both these objectives. Arms were what Iran wanted. If all the United States sought was to free the hostages, then an arms-for-hostages deal could achieve the imme- diate objectives of both sides. But if the U.S. objective was a broader strategic relationship, then the sale of arms should have been contin- gent upon first putting into place the elements of that relationship. An arms-for-hostages deal in this context could become counter-produc- tive to achieving this broader strategic objec- tive. In addition, release of the hostages would require exerting influence with Hizballah, which could involve the most radical elements of the Iranian regime. The kind of strategic opening sought by the United States, however, involved what were regarded as more moderate elements. The U.S. officials involved in the initiative appeared to have held three distinct views. For some, the principal motivation seemed consist- ently a strategic opening to Iran. For others, the strategic opening became a rationale for using arms sales to obtain the release of the hostages. For still others, the initiative ap- peared clearly as an arms-for-hostages deal from first to last. Whatever the intent, almost from the begin- ning the initiative became in fact a series of arms-for-hostages deals. The shipment of arms in November, 1985, was directly tied to a hos- tage release. Indeed, the August/September t?ansfer may have been nothing more than an arms-for-hostages trade. By July 14, 1985, a specific proposal for the sale of 100 TOWs to Iran in exchange for Iranian efforts to secure the release of all the hostages had been trans- mitted to the White House and discussed with the President. What actually occurred, at least so far as the September shipment was con- cerned, involved a direct link of arms and a hostage. The ' initiative continued to be described in terms of its broader strategic relationship. But those elements never really materialized. While a high-level meeting among senior U.S. and Iranian officials continued to be a subject of discussion, it never occurred. Although Mr. McFarlane went to Tehran in May of 1986, the promised high-level Iranians never appeared. In discussions among U.S. officials, the focus seemed to be on the prospects for obtaining release of the hostages, not on a strategic rela- tionship. Even if one accepts the explanation that arms and hostages represented only "bona fides" of seriousness of purpose for each side, that had clearly been established, one way or another, by the September exchange. It is true that, strictly speaking, arms were not exchanged for the hostages. The arms were sold for cash; and to Iran, rather than the ter- rorists holding the hostages. Iran clearly wanted to buy the arms, however, and time and time again U.S. willingness to sell was directly conditioned upon the release of hostages. Al- though Iran might claim that it did not itself hold the hostages, the whole arrangement was premised on Iran's ability to secure their re- lease. While the United States was seeking the re- lease of the hostages in this way, it was vigor- ously pursuing policies that were dramatically opposed to such efforts. The Reagan Adminis- tration in particular had come into office de- claring a firm stand against terrorism, which it continued to maintain. In December of 1985, the Administration completed a major study under the chairmanship of the Vice President. It resulted in a vigorous reaffirmation of U.S. opposition to terrorism in all its forms and a vow of total war on terrorism whatever its source. The Administration continued to pres- sure U.S. allies not to sell arms to Iran and not to make concessions to terrorists. No serious effort was made to reconcile the inconsistency between these policies and the Iran initiative. No effort was made systematical- ly to address the consequences of this incon- sistency-the effect on U.S. policy when, as it inevitably would, the Iran initiative became known. The Board believes that a strategic opening to Iran may have been in the national interest but that the United States never should have Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 been a party to the arms transfers. As arms-for- hostages trades, they could not help but create an incentive for further hostage-taking. As a violation of the U.S. arms embargo, they could only remove inhibitions on other nations from selling arms to Iran. This threatened to upset the military balance between Iran and Iraq, with consequent jeopardy to the Gulf States and the interests of the West in that region. The arms-for-hostages trades rewarded a regime that clearly supported terrorism and hostage-taking. They increased the risk that the United States would be perceived, especially in the Arab world, as a creature of Israel. They suggested to other U.S. allies and friends in the region that the United States had shifted its policy in favor of Iran. They raised questions as to whether U.S. policy statements could be relied upon. As the arms-for-hostages proposal first came to the United States, it clearly was tempting. The sale of just 100 TOWs was to produce the release of all seven Americans held in Lebanon. Even had the offer been genuine, it would have been unsound. But it was not genuine. The 100 TOWs did not produce seven hostages. Very quickly the price went up, and the arrange- ments became protracted. A pattern of succes- sive bargained exchanges of arms and hostages was quickly established. While release of all the hostages continued to be promised, in fact the hostages came out singly if at all. This sad his- tory is powerful evidence of why the United States should never have become involved in the arms transfers. NCS Staff Support for the Contras.-The activi- ties of the NSC staff in support of the Contras sought to achieve an important objective of the Administration's foreign policy. The President had publicly and emphatically declared his sup- port for the Nicaragua resistance. That brought his policy in direct conflict with that of the Congress, at least during the period that direct or indirect support of military operations in Nicaragua was barred. Although the evidence before the Board is limited, no serious effort appears to have been made to come to grips with the risks to the President of direct NSC support for the Con- tras in the face of these Congressional restric- tions. Even if it could be argued that these re- strictions did not technically apply to the NSC staff, these activities presented great political risk to the President. The appearance of the President's personal staff doing what Congress had forbade other agencies to do could, once disclosed, only touch off a firestorm in the Congress and threaten the Administration's whole policy on the Contras. 2. The Decision-making Process Was Flawed. -Be- cause the arms sales to Iran and the NSC sup- port for the Contras occurred in settings of such controversy, one would expect that the decisions to undertake these activities would have been made only after intense and thor- ough consideration. In fact, a far different pic- ture emerges. Arms Transfers to Iran.-The Iran initiative was handled almost casually and through informal channels, always apparently with an expectation that the process would end with the next arms- for-hostages exchange. It was subjected neither to the general procedures for interagency con- sideration and review of policy issues nor the more restrictive procedures set out in NSDD 159 for handling covert operations. This had a number of consequences. (i) The Opportunity for a Full Hearing before the President Was Inadequate.-In the last half of 1985, the Israelis made three separate propos- als to the United States with respect to the Iran initiative (two in July and one in August). In addition, Israel made three separate deliveries of arms to Iran, one each in August, Septem- ber, and November. Yet prior to December 7, 1985, there was at most one meeting of the NSC principals, a meeting which several partici- pants recall taking place on August 6. There is no dispute that full meetings of the principals did occur on December 7, 1985, and on Janu- ary 7, 1986. But the proposal to shift to direct U.S. arms sales to Iran appears not to have been discussed until later. It was considered by the President at a meeting on January 17 which only the Vice President, Mr. Regan, Mr. For- tier, and VADM Poindexter attended. Thereaf- ter, the only senior-level review the Iran initia- tive received was during one or another of the President's daily national security briefings. These were routinely attended only by the President, the Vice President, Mr. Regan, and VADM Poindexter. There was no subsequent collective consideration of the Iran initiative by the NSC principals before it became public 11 months later. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 This was not sufficient for a matter as impor- tant and consequential as the Iran initiative. Two or three cabinet-level reviews in a period of 17 months was not enough. The meeting on December 7 came late in the day, after the pat- tern of arms-for-hostages exchanges had become well established. The January 7 meet- ing had earmarks of a meeting held after a de- cision had already been made. Indeed, a draft Covert Action Finding authorizing the initiative had been signed by the President, though per- haps inadvertently, the previous day. At each significant step in the Iran initiative, deliberations among the NSC principals in the presence of the President should have been vir- tually automatic. This was not and should not have been a formal requirement, something prescribed by statute. Rather, it should have been something the NSC principals desired as a means of ensuring an optimal environment for Presidential judgment. The meetings should have been preceded by consideration by the NSC principals of staff papers prepared ac- cording to the procedures applicable to covert actions. These should have reviewed the histo- ry of the initiative, analyzed the issues then presented, developed a range of realistic op- tions, presented the odds of success and the costs of failure, and addressed questions of im- plementation and execution. Had this been done, the objectives of the Iran initiative might have been clarified and alternatives to the sale of arms might have been identified. (ii) The Initiative Was Never Subjected to a Rigor- ous Review below the Cabinet Level. -Because of the obsession with secrecy, interagency consid- eration of the initiative was limited to the cabi- net level. With the exception of the NSC staff and, after January 17, 1986, a handful of CIA officials, the rest of the executive departments and agencies were largely excluded. As a consequence, the initiative was never vetted at the staff level. This deprived those re- sponsible for the initiative of considerable ex- pertise-on the situation in Iran; on the diffi- culties of dealing with terrorists; on the me- chanics of conducting a diplomatic opening. It also kept the plan from receiving a tough, criti- cal review. Moreover, the initiative did not receive a policy review below cabinet level. Careful con- sideration at the Deputy/Under Secretary level might have exposed the confusion in U.S. ob- jectives and clarified the risks of using arms as an instrument of policy in this instance. The vetting process would also have ensured better use of U.S. intelligence. As it was, the in- telligence input into the decision process was clearly inadequate. First, no independent eval- uation of the Israeli proposals offered in July and August appears to have been sought or of- fered by U.S. intelligence agencies. The Israelis represented that they for some time had had contacts with elements in Iran. The prospects for an opening to Iran depended heavily on these contacts, yet no systematic assessment ap- pears to have been made by U.S. intelligence agencies of the reliability and motivations of these contacts, and the identity and objectives of the elements in Iran that the opening was supposed to reach. Neither was any systematic assessment made of the motivation of the Israe- lis. Second, neither Mr. Ghorbanifar nor the second channel seem to have been subjected to a systematic intelligence vetting before they were engaged as intermediaries. Mr. Ghorbani- far had been known to the CIA for some time and the agency had substantial doubts as to his reliability and truthfulness. Yet the agency did not volunteer that information or inquire about the identity of the intermediary if his name was unknown. Conversely, no early request for a name check was made of the CIA, and it was not until January 11, 1986, that the agency gave Mr. Ghorbanifar a new polygraph, which he failed. Notwithstanding this situation, with the signing of the January 17 Finding, the United States took control of the initiative and became even more directly involved with Mr. Ghorbanifar. The issues raised by the poly- graph results do not appear to have been sys- tematically addressed. In similar fashion, no prior intelligence check appears to have been made on the second channel. Third, although the President recalled being assured that the arms sales to Iran would not alter the military balance with Iran, the Board could find no evidence that the President was ever briefed on this subject. The question of the impact of any intelligence shared with the Iranians does not appear to have been brought to the President's attention. A thorough vetting would have included con- sideration of the legal implications of the initia- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 tive. There appeared little effort to face square- ly the legal restrictions and notification require- ments applicable to the operation. At several points, other agencies raised questions about violations of law or regulations. These con- cerns were dismissed without, it appears, inves- tigating them with the benefit of legal counsel. Finally, insufficient attention was given to the implications. of implementation. The implemen- tation of the initiative raised a number of issues: should the NSC staff rather than the CIA have had operational control; what were the implications of Israeli involvement; how re- liable were the Iranian and various other pri- vate intermediaries; what were the implications of the use of Mr. Secord's private network of operatives; what were the implications for the military balance in the region; was operational security adequate. Nowhere do these issues appear to have been sufficiently addressed. The concern for preserving the secrecy of the initiative provided an excuse for abandon- ing sound process. Yet the initiative was known to a variety of persons with diverse interests and ambitions-Israelis, Iranians, various arms dealers and business intermediaries, and LtCol North's network of private operatives. While concern for secrecy would have justified limit- ing the circle of persons knowledgeable about the initiative, in this case it was drawn too tightly. As a consequence, important advice and counsel were lost. In January of 1985, the President had adopt- ed procedures for striking the proper balance between secrecy and the need for consultation on sensitive programs. These covered the insti- tution, implementation, and review of covert operations. In the case of the Iran initiative, these procedures were almost totally ignored. The only staff work the President apparently reviewed in connection with the Iran initiative was prepared by NSC staff members, under- the direction of the National Security Advisor. These were, of course, the principal propo- nents of the initiative. A portion of this staff work was reviewed by the Board. It was fre- quently striking in its failure to present the record of past efforts-particularly past failures. Alternative ways of achieving U.S. objectives- other than yet another arms-for-hostages deal-were not discussed. Frequently it neither adequately presented the risks involved in pur- suing the initiative nor the full force of the dis- senting views of other NSC principals. On bal- ance, it did not serve the President well. (iii) The Process Was Too Informal.-The whole decision process was too informal. Even when meetings among NSC principals did occur, often there was no prior notice of the agenda. No formal written minutes seem to have been kept. Decisions subsequently taken by the President were not formally recorded. An ex- ception was the January 17 Finding, but even this was apparently not circulated or shown to key U.S. officials. The effect of this informality was that the ini- tiative lacked a formal institutional record. This precluded the participants from undertaking the more informed analysis and reflection that is afforded by a written record, as opposed to mere recollection. It made it difficult to deter- mine where the initiative stood, and to learn lessons from the record that could guide future action. This lack of an institutional record per- mitted specific proposals for arms-for-hostages exchanges to be presented in a vacuum, with- out reference to the results of past proposals. Had a searching and thorough review of the Iran initiative been undertaken at any stage in the process, it would have been extremely diffi- cult to conduct. The Board can attest first hand to the problem of conducting a review in the absence of such records. Indeed, the exposition in the wake of public revelation suffered the most. NSC Staff Support for the Contras.-It is not clear how LtCol North first became involved in activities in direct support of the Contras during the period of the Congressional ban. The Board did not have before it much evi- dence on this point. In the evidence that the Board did have, there is no suggestion at any point of any discussion of LtCol North's activi- ties with the President in any forum. There also does not appear to have been any interagency review of LtCol North's activities at any level. This latter point is not surprising given the Congressional restrictions under which the other relevant agencies were operating. But the NSC staff apparently did not compensate for the lack of any interagency review with its own internal vetting of these activities. LtCol North apparently worked largely in isolation, keeping first Mr. McFarlane and then VADM Poindexter informed. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The lack of adequate vetting is particularly evident on the question.of the legality of LtCol North's activities. The Board did not make a, judgment on the legal issues raised by his ac- tivities in support of the Contras. Nevertheless, some things can be said. If these activities were illegal, obviously they should not have been conducted. If there was any doubt on the matter, systematic legal advice should have been obtained. The political cost to the President of illegal action by the NSC staff was particularly high, both because the NSC staff is the personal staff of the Presi- dent and because of the history of serious con- flict with the Congress over the issue of Contra support. For these reasons, the President should have been kept apprised of any review of the legality of LtCol North's activities. Legal advice was apparently obtained from the President's Intelligence Oversight Board. Without passing on the quality of that advice, it is an odd source. It would be one thing for the Intelligence Oversight Board to review the legal advice provided by some other agency. It is another for the Intelligence Oversight Board to be originating legal advice of its own. That is a function more appropriate for the NSC staffs own legal counsel.' 3. Implementation Was Unprofessional. -The manner in which the Iran initiative was imple- mented and LtCol North undertook to support the Contras are very similar. This is in large part because the same cast of characters was in- volved. In both cases the operations were un- professional, although the Board has much less evidence with respect to LtCol North's Contra activities. Arms Transfers to Iran.-With the signing of the January 17 Finding, the Iran initiative became a U.S. operation run by the NSC staff. LtCol North made most of the significant oper- ational decisions. He conducted the operation through Mr. Secord and his associates, a net- work of private individuals already involved in the Contra resupply operation. To this was added a handful of selected individuals from the CIA. But the CIA support was limited. Two CIA officials, though often at meetings, had a rela- tively limited role. One served as the point man ' The issue of legal advice to the NSC staff is treated in more detail in Part V of this report. for LtCol North in providing logistics and fi- nancial arrangements. The other (Mr. Allen) served as a contact between LtCol North and .the intelligence community. By contrast, George Cave actually played a significant and expanding role. However, Clair George, Deputy Director for Operations at CIA, told. the Board: "George was paid by me and on the paper was working for me. But I think in the heat of the battle, * * * George was working for Oliver North." Because so few people from the departments and agencies were told of the initiative, LtCol North cut himself off from resources and ex- pertise from within the government. He relied instead on a number of private intermediaries, businessmen and other financial brokers, pri- vate operators, and Iranians hostile to the United States. Some of these were individuals with questionable credentials and potentially large personal financial interests in the transac- tions. This made the transactions unnecessarily complicated and invited kick-backs and payoffs. This arrangement also dramatically increased the risks that the intiative would leak. Yet no provision was made for such an eventuality. Further, the use of Mr. Secord's private net- work in the Iran initiative linked those opera- tors with the resupply of the Contras, threaten- ing exposure of both operations if either became public. The result was a very unprofessional oper- ation. Mr. Secord undertook in November, 1985, to arrange landing clearance for the Israeli flight bringing the HAWK missiles into a third-coun- try staging area. The arrangements fell apart. A CIA field officer attributed this failure to the amateurish way in which Mr. Secord and his as- sociates approached officials in the government from which landing clearance was needed. If Mr. Ghorbanifar is to be believed, the mission of Mr. McFarlane to Tehran was undertaken without any advance work, and with distinctly different expectations on the part of the two sides. This could have contributed to its failure. But there were much more serious errors. Without adequate study and consideration, in- telligence was passed to the Iranians of poten- tially major significance to the Iran/Iraq war. At the meeting with the second channel on Oc- tober 5-7, 1986, LtCol North misrepresented Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 his access to the President. He told Mr. Ghor- banifar stories of conversations with the Presi- dent which were wholly fanciful. He suggested without authority a shift in U.S. policy adverse to Iraq in general and Saddam Husain in par- ticular. Finally, in the nine-point agenda dis- cussed on October 26-28, he committed the United States, without authorization, to a posi- tion contrary to well established U.S. policy on the prisoners held by Kuwait. The conduct of the negotiators with Mr. Ghorbanifar and the second channel were han- dled in a way that revealed obvious inexperi- ence. The discussions were too casual for deal- ings with intermediaries to a regime so hostile to U.S. interests. The U.S. hand was repeatedly tipped and unskillfully played. The arrange- ments failed to guarantee that the U.S. ob- tained its hostages in exchange for the arms. Repeatedly, LtCol North permitted arms to be delivered without the release of a single cap- tive. The implementation of the initiative was never subjected to a rigorous review. LtCol North appears to have kept VADM Poindexter fully informed of his activities. In addition, VADM Poindexter, LtCol North, and the CIA officials involved apparently apprised Director Casey of many of the operational details. But LtCol North and his operation functioned largely outside the orbit of the U.S. Govern- ment. Their activities were not subject to criti- cal reviews of any kind. After the initial hostage release in Septem- ber, 1985, it was over 10 months before an- other hostage was released. This despite recur- ring promises of the release of all the hostages and four intervening arms shipments. Begin- ning with the November shipment, the United States increasingly took over the operation of the initiative. In January, 1986, it decided to transfer arms directly to Iran. Any of these developments could have served as a useful occasion for a systematic reconsider- ation of the initiative. Indeed, at least one of the schemes contained a provision for reconsid- eration if the initial -assumptions proved to be invalid. They did, but the reconsideration never took place. It was the responsibility of the Na- tional Security Advisor and the responsible offi- cers on the NSC staff to call for such a review. But they were too involved in the initiative both as advocates and as implementors. This made it less likely that they would initiate the kind of review and reconsideration that should have been undertaken. NSC Staff Support for the Contras. -As already noted, the NSC activities in support of the Contras and its role in the Iran initiative were of a piece. In the former, there was an added element of LtCol North's intervention in the customs investigation of the crash of the SAT aircraft. Here, too, selected CIA officials re- ported directly to LtCol North. The limited evi- dence before the Board suggested that the ac- tivities in support of the Contras involved un- professionalism much like that in the Iran oper- ation. iv. Congress Was Never Notified.-Congress was not apprised either of the Iran initiative or of the NSC staff's activities in support of the Con- tras. In the case of Iran, because release of the hostages was expected within a short time after the delivery of equipment, and because public disclosure could have destroyed the operation and perhaps endangered the hostages, it could be argued that it was justifiable to defer notifi- cation of Congress prior to the first shipment of arms to Iran. The plan apparently was to inform Congress immediately after the hostages were .safely in U.S. hands. But after the first de- livery failed to release all the hostages, and as one hostage release plan was replaced by an- other, Congress certainly should have been in- formed. This could have been done during a period when no specific hostage release plan was in execution. Consultation with Congress could have been useful to the President, for it might have given him some sense of how the public would react to the initiative. It also might have influenced his decision to continue to pursue it. v. Legal Issues. -In addition to conflicting with several fundamental U.S. policies, selling arms to Iran raised far-reaching legal questions. How it dealt with these is important to an evaluation of the Iran initiative. Arms Transfers to Iran.-It was not part of the Board's mandate to consider issues of law as they may pertain to individuals or detailed as- pects of the Iran initiative. Instead, the Board focused on the legal basis for the arms trans- fers to Iran and how issues of law were ad- dressed in the NSC process. IV-7 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The Arms Export Control Act, the principal U.S. statute governing arms sales abroad, makes it unlawful to export , arms without a li- cense. Exports of arms by U.S. government agencies, however, do not require a license if they are otherwise authorized by law. Criminal.. penalties-fines and imprisonment-are provid- ed for willful violations. The initial arms transfers in the Iran initia- tive involved the sale and shipment by Israel of U.S.-origin missiles. The usual way for such international retransfer of arms to be author- ized under U.S. law is pursuant to the Arms Export Control Act. This Act requires that the President consent to any transfers by another country of arms exported under the Act and imposes three conditions before such Presiden- tial consent may be given: (a) the United States would itself transfer the arms in question to the recipient coun- try; (b) a commitment in writing has been ob- tained from the recipient country against unauthorized retransfer of significant arms, such as missiles; and (c) a prior written certification regarding the retransfer is submitted to the Congress if the defense equipment, such as missiles, has an acquisition cost of 14 million dollars or more. 22 U.S.C. 2753 (a), (d). In addition, the Act generally imposes re- strictions on which countries are eligible to re- ceive U.S. arms and on the purposes for which. arms may be sold.2 The other possible avenue whereby govern- ment arms transfers to Iran may be authorized by law would be in connection with intelligence operations conducted under the National Secu- rity Act. This Act requires that the Director of Central Intelligence and the heads of other in- telligence agencies keep the two Congressional intelligence committees "fully and currently in- 2 It may be possible to authorize transfers by another country under the Arms Export Control Act without obtaining the Presi- dent's consent. As a practical matter, however, the legal require- ments may not differ significantly. For example, section 614(2) permits the President to waive the requirements of the Act. But this waiver authority may not be exercised unless it is determined that the international arms sales are "vital to the national security interests of the United States." Moreover, before granting a waiver, the President must consult with and provide written justi- fication to the foreign affairs and appropriations committees of the Congress. 22. U.S.C. 2374(3). formed" of all intelligence activities under their responsibility. 50 U.S.C. 413. Where prior notice of significant intelligence activities is not given, the intelligence committees are to be in- formed "in a timely fashion." In addition, the so called Hughes-Ryan Amendment to the For- eign Assistance Act requires that "significant anticipated intelligence activities" may not be conducted by the CIA unless and until the President finds that "each such operation is im- portant to the national security of the United States." 22 U.S.C. 2422. When the Israelis began transfering arms to Iran in August, 1985, they were not acting on their own. U.S. officials had knowledge. about the essential elements of the proposed ship- ments. The United States shared some common purpose in the transfers-and received a benefit from them-the release of a hostage. Most importantly, Mr. McFarlane communicat- ed prior U.S. approval to the Israelis- for the shipments, including an undertaking for replen- ishment. But for this U.S. approval, the transac- tions may not have gone forward. In short, the United States was an essential participant in the arms transfers to Iran that occurred in 1985. Whether this U.S. involvement in the arms transfers by the Israelis was lawful depends fundamentally upon whether the President ap- proved the transactions before they occurred. In the absence of Presidential approval, there does not appear to be any authority in this case for the United States to engage in the transfer - of arms or consent to the transfer by another country. The arms transfers to Iran in 1985 and hence the Iran initiative itself would -have proceeded contrary to U.S. law. The Attorney General reached a similar judg- ment with respect to the activities of the CIA in facilitating the November, 1985 shipment by the Israelis of HAWK missiles. In a letter to the Board,3 the Attorney General- concluded that with respect to the CIA assistance, "a finding under the Hughes-Ryan Amendment would be required." 4 8 A copy of the letter is set forth in Appendix H. 4 Apparently no determination was made at the time as to the legality of these activities even though serious concerns about le- gality were expressed by the Deputy Director of CIA, a Presiden- tial finding was sought by CIA officials before any further CIA activities in support of the ,Iran initiative were undertaken, and the CIA counsel, Mr. Stanley Sporkin, advised that as a matter of prudence any new finding should seek to ratify the prior CIA ac- tivities. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 The Board was unable to reach a conclusive judgment about whether the 1985 shipments of arms to Iran were approved in advance by the President. On balance the Board believes that it is plausible to conclude that he did approve them in advance. Yet even if the President in some sense con- sented to or approved the transactions, a seri- ous question of law remains. It is not clear that the form of the approval was sufficient for pur- poses of either the Arms Export Control Act or the Hughes-Ryan Amendment. The consent did not meet the conditions of the Arms Export Control Act, especially in the absence of a prior written commitment from the Iranians regard- ing unauthorized retransfer. Under the National Security Act, it is not clear that mere oral approval by the President would qualify as a Presidential finding that the initiative was vital to the national security inter- ests of the United States. The approval was never reduced to writing. It appears to have been conveyed to only one person. The Presi- dent himself has no memory of it. And there is contradictory evidence from the President's -ad- visors about how the President responded when he learned of the arms shipments which the approval was to support. In addition, the requirement for Congressional notification was ignored. In these circumstances, even if the President approved of the transactions, it is dif- ficult to conclude that. his actions constituted adequate legal authority. The legal requirements pertaining to the sale of arms to Iran are complex; the availability of legal authority, including that which may flow from the President's constitutional powers, is difficult to delineate. Definitive legal conclu- sions will also depend upon a variety of specific factual determinations that the Board has not attempted to resolve-for example, the specific content of any consent provided by the Presi- dent, the authority under which the missiles were originally transferred to Israel, the knowl- edge and intentions of individuals, and the like. Nevertheless, it was sufficient for the Board's purposes to conclude that the legal underpin- ning of the Iran initiative during. 1985 was at best highly questionable. The Presidential Finding of January 17, 1986, formally approved the Iran initiative as a covert intelligence operation under the Nation- al Security Act. This ended the uncertainty about the legal status of the initiative and pro- vided legal authority for the United States to transfer arms directly to Iran. The National Security Act also requires noti- fication of Congress of covert intelligence ac- tivities. If not done in advance, notification must be "in a timely fashion." The Presidential finding of January 17 directed that Congres- sional notification be withheld, and this deci- sion appears to have never been reconsidered. While there was surely justification to suspend Congressional notification in advance of a par- ticular transaction relating to a hostage release, the law would seem to require disclosure where, as in the Iran case, a pattern of relative inactivity occurs over an extended period. To do otherwise prevents the Congress from ful- filling its proper oversight responsibilities. Throughout the Iran initiative, significant questions of law do not appear to have been adequately addressed. In the face of a sweeping statutory prohibition and explicit requirements relating to Presidential consent to arms trans- fers by third countries, there appears to have been at the outset in 1985 little attention, let alone systematic analysis, devoted to how Presi- dential. actions would comply with U.S. law. The Board has found no evidence that an eval-~ uation was ever done during the life.of the op- eration to determine whether it continued to comply with the terms of the January 17 Presi- dential Finding. Similarly, when a new prohibi- tion was added to the Arms Export Control Act in August of 1986 to prohibit exports to coun- tries on the terrorism list (a list which con- tained Iran), no evaluation was made to deter- mine whether this law affected authority to transfer arms to Iran in connection with intelli- gence operations under the National Security Act. This lack of legal vigilance markedly in- creased the chances that the initiative would proceed contrary to law. NSC Staff Support for the Contras.-The NSC staff activities in support of the Contras were marked by the same uncertainty as to legal au- thority and insensitivity to legal issues as were present in the Iran initiative. The ambiguity of the law governing activities in support of the Contras- presented a greater challenge than even the considerable complexity of laws gov- erning arms transfers. Intense Congressional scrutiny with respect to the NSC staff activities Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 relating to the Contras added to the potential costs of actions that pushed the limits of the law. In this context, the NSC staff should have been particularly cautious, avoiding operational activity in this area and seeking legal counsel. The Board saw no signs of such restraint. B. Failure of Responsibility The NSC system will not work unless the President makes it work. After all, this system was created to serve the President of the United States in ways of his choosing. By his actions, by his leadership, the President there- fore determines the quality of its performance. By his own account, as evidenced in his diary notes, and as conveyed to the Board by his principal advisors, President Reagan was deeply committed to securing the release of the hos- tages. It was this intense compassion for the hostages that appeared to motivate his stead- fast support of the Iran initiative, even in the face of opposition from his Secretaries of State and Defense. In his obvious commitment, the President ap- pears to have proceeded with a concept of the initiative that was not accurately reflected in the reality of the operation. The President did not seem to be aware of the way in which the operation was implemented and the full conse- quences of U.S. participation. The President's expressed concern for the safety of both the hostages and the Iranians who could have been at risk may have been conveyed in a manner so as to inhibit the full functioning of the system. The President's management style is to put the principal responsibility for policy review and implementation on the shoulders of his ad- visors. Nevertheless, with such a complex, high- risk operation and so much at stake, the Presi- dent should have ensured that the NSC system did not fail him. He did not force his policy to undergo the most critical review of which the NSC participants and the process were capable. At no time did he insist upon accountability and performance review. Had the President chosen to drive the NSC system, the outcome could well have been different. As it was, the most powerful features of the NSC system- providing comprehensive analysis, alternatives and follow-up-were not utilized. The Board found a strong consensus among NSC participants that the President's priority in the Iran initiative was the release of U.S. hos- tages. But setting priorities is not enough when it comes to sensitive and risky initiatives that directly affect U.S. national security. He must ensure that the content and tactics of an initia- tive match his priorities and objectives. He must insist upon accountability. For it is the President who must take responsibility for the NSC system and deal with the consequences. Beyond the President, the other NSC princi- pals and the National Security Advisor must share in the responsibility for the NSC system. President Reagan's personal management style places an especially heavy responsibility on his key advisors. Knowing his style, they should have been particularly mindful of the need for special attention to the manner in which this arms sale initiative developed and proceeded. On this score, neither the National Security Advisor nor the other NSC principals deserve high marks. It is their obligation as members and advi- sors to the Council to ensure that the President is adequately served. The principal subordi- nates to the President must not be deterred from urging the President not to proceed on a highly questionable course of action even in the face of his strong conviction to the con- trary. In the case of the Iran initiative, the NSC process did not fail, it simply was largely ig- nored. The National Security Advisor and the NSC principals all had a duty to raise this issue and insist that orderly process be imposed. None of them did so. All had the opportunity. While the National Security Advisor had the responsibility to see that an orderly process was observed, his fail- ure to do 'so does not excuse the other NSC principals. It does not appear that any of the NSC principals called for more frequent con- sideration of the Iran initiative by the NSC principals in the presence of the President. None of the principals called for a serious vet- ting of the initiative by even a restricted group of disinterested individuals. The intelligence questions do not appear to have been raised, and legal considerations, while raised, were not pressed. No one seemed to have complained about the informality of the process. No one Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 called for a thorough reexamination once the initiative did not meet expectations or the manner of execution changed. While one or another of the NSC principals suspected that something was amiss, none vigorously pursued the issue. Mr. Regan also shares in this responsibility. More than almost any Chief of Staff of recent memory, he asserted personal control over the White House staff and sought to extend this control to the National Security Advisor. He was personally active in national security affairs and attended almost all of the relevant meet- ings regarding the Iran initiative. He, as much as anyone, should have insisted that an orderly process be observed. In addition, he especially should have ensured that plans were made for handling any public disclosure of the initiative. He must bear primary responsibility for the chaos that descended upon the White House when such disclosure did occur. Mr. McFarlane appeared caught between a President who supported the initiative and the cabinet officers who strongly opposed it. While he made efforts to keep these cabinet officers informed, the Board heard complaints from some that he was not always successful. VADM Poindexter on several occasions apparently sought to exclude NSC principals other than the President from knowledge of the initiative. Indeed, on one or more occasions Secretary Shultz may have been actively misled by VADM Poindexter. VADM Poindexter also failed grievously on the matter of Contra diversion. Evidence indi- cates that VADM Poindexter knew that a diver- sion occurred, yet he did not take the steps that were required given the gravity of that pros- pect. He apparently failed to appreciate or ig- nored the serious legal and political risks pre- sented. His clear obligation was either to inves- tigate the matter or take it to the President-or both. He did neither. Director Casey shared a similar responsibility. Evidence suggests that he received information about the possible diver- sion of funds to the Contras almost a month before the story broke. He, too, did not move promptly to raise the matter with the President. Yet his responsibility to do so was clear. The NSC principals other than the President may be somewhat excused by the insufficient attention on the part of the National Security Advisor to the need to keep all the principals fully informed. Given the importance of the issue and the sharp policy divergences in- volved, however, Secretary Shultz and Secretary Weinberger in particular distanced themselves from the march of events. Secretary Shultz spe- cifically requested to be informed only as nec- essary to perform his job. Secretary Weinberg- er had access through intelligence to details about the operation. Their obligation was to give the President their full support and contin- ued advice with respect to the program or, if they could not in conscience do that, to so inform the President. Instead, they simply dis- tanced themselves from the program. They protected the record as to their own positions on this issue. They were not energetic in at- tempting to protect the President from the con- sequences of his personal commitment to free- ing the hostages. Director Casey appears to have been in- formed in considerable detail about the specif- ics of the Iranian operation. He appears to have acquiesced in and to have encouraged North's exercise of direct operational control over the operation. Because of the NSC staff's proximity to and close identification with the President, this increased the risks to the Presi- dent if the initiative became public or the oper- ation failed. There is no evidence, however, that Director Casey explained this risk to the President or made clear to the President that LtCol North, rather than the CIA, was running the oper- ation. The President does not recall ever being informed of this fact. Indeed, Director Casey should have gone further and pressed for oper- ational responsibility to be transferred to the CIA. Director Casey should have taken the lead in vetting the assumptions presented by the Israe- lis on which the program was based and in pressing for an early examination of the reli- ance upon Mr. Ghorbanifar and the second channel as intermediaries. He should also have assumed responsibility for checking out the other intermediaries involved in the operation. Finally, because Congressional restrictions on covert actions are both largely directed at and familiar to the CIA, Director Casey should have taken the lead in keeping the question of Con- gressional notification active. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Finally, Director Casey, and, to a lesser extent, Secretary Weinberger, should have taken it upon themselves to assess the effect of the transfer of arms and intelligence to Iran on the Iran/Iraq military balance, and to transmit that information to the President. C. The Role of the Israelis Conversations with emissaries from the Gov- ernment of,Israel took place prior to the com- mencement of the initiative. It remains unclear whether the initial proposal to open the Ghor- banifar channel was an Israeli initiative, was brought on by the avarice of arms dealers, or came as a result of an American request for as- sistance. There is no doubt, however, that it was Israel that pressed Mr. Ghorbanifar on the United States. U.S. officials accepted Israeli as- surances that they had had for some time an extensive dialogue that involved high-level Ira- nians, as well as their assurances of Mr. Ghor- banifar's bona fides. Thereafter, at critical points in the initiative, when doubts were ex- pressed by critical U.S. participants, an Israeli emissary would arrive with encouragement, often a specific proposal, and pressure to stay with the Ghorbanifar channel. From the record available to the Board, it is not possible to determine the role of key U.S. participants in prompting these Israeli interven- tions. There were active and ongoing consulta- tions between LtCol North and officials of the Israeli government, specifically David Kimche and Amiram Nir. In addition, Mr. Schwimmer, Mr. Nimrodi, and Mr. Ledeen, also in frequent contact with LtCol North, had close. ties with the government of Israel. It may be that the Israeli interventions were actively solicited by particular U.S. officials. Without the benefit of the views of the Israeli officials involved, it is hard to know the facts. It is clear, however, that Israel had its own interests, some in direct conflict with those of the United States, in having the United States pursue the initiative. For this reason, it had an incentive to keep the initiative alive. It sought to do this by interventions with the NSC staff, the National Security Advisor, and the Presi- dent. Although it may have received sugges- tions from LtCol North, Mr. Ledeen, and others, it responded affirmatively to these sug- gestions by reason of its own interests. Even if the Government of Israel actively worked to begin the initiative and to keep it going, the U.S. Government is responsible for its own decisions. Key participants in U.S. de- liberations made the point that Israel's objec- tives and interests in this initiative were differ- ent from, and in some respects in conflict with, those of the United States. Although Israel dealt with those portions of the U.S. Govern- ment that it deemed were sympathetic to the initiative, there is nothing improper per se about this fact. U.S. decision-makers made their own decisions and must bear responsibility for the consequences. D. Aftermath-The Efforts To Tell the Story From the first hint in late-October, 1986 that the McFarlane trip would soon become public, information on the Iran initiative and Contra activity cascaded into the press. The veiled hints of secret activities, random and indis- criminate disclosures of information from a va- riety of sources, both knowledgeable and other- wise, and conflicting statements by high-level officials presented a confusing picture to the American public. The Board recognized that conflicts among contemporaneous documents and statements raised concern about the man- agement of the public presentation of facts on the Iran initiative. Though the Board reviewed some evidence 8 on events after the exposure, our ability to comment on these events remains limited. The Board found evidence that immediately following the public disclosure, the President wanted to avoid providing too much specificity or detail out of concern for the hostages still held in Lebanon and those Iranians who had supported the initiative. In doing so, he did not, we believe, intend to mislead the American public or cover-up unlawful conduct. By at least November 20, the President took steps to ensure that all the facts would come out. From the President's request to Mr. Meese to look into the history of the initiative, to his appoint- ment of this Board, to his request for an Inde- pendent Counsel, to his willingness to discuss this matter fully and to review his personal Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 notes with us, the Board is convinced that the President does indeed want the full story to be told. Those who prepared the President's support- ing documentation did not appear, at least ini- tially, to share in the President's ultimate wishes. Mr. McFarlane described for the Board the process used by the NSC staff to create a chronology that obscured essential facts. Mr. McFarlane contributed to the creation of this chronology which did not, he said, present "a full and completely accurate account" of the events and left ambiguous the President's role. This was, according to Mr. McFarlane, done to distance the President from the timing and nature of the President's authorization. He told the Board that he wrote a memorandum on November 18, which tried to, in his own words, "gild the President's motives." This version was incorporated into the chronology. Mr. McFarlane told the Board that he knew the ac- count was "misleading, at least, and wrong, at worst." Mr. McFarlane told the Board that he did provide the Attorney General an accurate account of the President's role. The Board found considerable reason to question the actions of LtCol North in the aftermath of the disclosure. The Board has no evidence to either confirm or refute that LtCol North destroyed documents on the initiative in an effort to conceal facts from threatened in- vestigations. The Board found indications that LtCol North was involved in an effort, over time, to conceal or withhold important infor- mation. The files of LtCol North contained much of the historical documentation that the Board used to construct its narrative. More- over, LtCol North was the primary U.S. govern- ment official involved in the details of the oper- ation. The chronology he produced has many inaccuracies. These "histories" were to be the basis of the "full" story of the Iran initiative. These inaccuracies lend some evidence to the proposition that LtCol North, either. on his own or at the behest of others, actively sought to conceal important information. Out of concern for the protection of classi- fied material, Director Casey and VADM Poin- dexter were to brief only the Congressional in- telligence committees on the "full" story; the DCI before the Committees and VADM Poin- dexter in private sessions with the chairmen and vice-chairmen. The DCI and VADM Poin- dexter undertook to do this on November 21, 1986. It appears from the copy of the DCI's testimony and notes of VADM Poindexter's meetings, that they did not fully relate the nature of events as they had occurred. The result is an understandable perception that they were not forthcoming. The Board is also concerned about various notes that appear to be missing. VADM Poin- dexter was the official note taker in some key meetings, yet no notes for the meetings can be found. The reason for the lack of such notes remains unknown to the Board. If they were written, they may contain very important infor- mation. We have no way of knowing if they exist. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Recommendations "Not only * * * is the Federal power over external affairs in origin and es- sential character different from that over internal affairs, but participation in the exercise of the power is signifi- cantly limited. In this vast external realm, with its important, complicated, delicate and manifold problems, ' the President alone has the power to speak or listen as a representative of the nation." United States v. Curtiss- Wright Export Corp., 299. U.S. 304, 319 (1936). Whereas the ultimate power to formulate do- mestic policy resides in the Congress, the pri- mary responsibility for the formulation and im- plementation of national security policy falls on the President. It is the President who is the usual source of innovation and responsiveness in this field. The departments and agencies-the Defense De- partment, State Department, and CIA bureauc- racies-tend to resist policy change. Each has its own perspective based on long experience. The challenge for the President is to bring his perspective to bear on these bureaucracies for they are his instruments for executing national security policy, and he must work through them. His task is to provide them leadership and direction. The National Security Act of 1947 and the system that has grown up under it affords the President special tools for carrying out this im- portant role. These tools are the National Se- curity Council, the National Security Advisor, and the NSC Staff. These are the means through which the creative impulses of the President are brought to bear on the perma- nent government. The National Security Act, and custom and practice, rightly give the Presi- dent wide latitude in fashioning exactly how these means are used. There is no magic formula which can be ap- . plied to the NSC structure and process to produce an optimal system. Because the system is the vehicle through which the President for- mulates and implements his national security policy, it must adapt to each individual Presi- dent's style and management philosophy. This means that NSC structures and processes must be flexible, not rigid. Overprescription would, as discussed in Part II, either destroy the system or render it ineffective. Nevertheless, this does not mean there can be no guidelines or recommendations that might improve the operation of the system, whatever the particular style of the incumbent President. We have reviewed the operation of the. system over the past 40 years, through good times and bad. We have listened carefully to the views of all the living former Presidents as well as those of most of the participants in their own national security systems. With the strong caveat that flexibility and adaptability must be at the core, it is our judgment that the national security system seems to have worked best when it has in general operated along the lines set forth below. Organizing for National Security. Because of the wide latitude in the ,National Security Act, the President bears a special responsibility for the effective performance of the NSC system. A President must at the outset provide guidelines to the members of the National Security Coun- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 cil, his National Security Advisor, and the Na- tional Security Council staff. These guidelines, to be effective, must include how they will relate to one another, what procedures will be followed, what the President expects of them. If his advisors are not performing as he likes, only the President can intervene. The National Security Council principals other than the President participate on the Council in a unique capacity.' Although hold- ing a seat by virtue of their official positions in the Administration, when they sit as members of the Council they sit not as cabinet secretar- ies or department heads but as advisors to the President. They are there not simply to ad- vance or defend the particular positions of the departments or agencies they head but to give their best advice to the President. Their job- and their challenge-is to see the issue from this perspective, not from the narrower inter- ests of their respective bureaucracies. The National Security Council is only adviso- ry. It is the President alone who decides. When the NSC principals receive those decisions, they do so as heads of the appropriate departments or agencies. They are then responsible to see that the President's decisions are carried out by those organizations accurately and effectively. This is an important point. The policy inno- vation and creativity of the President encoun- ters a natural resistance from the executing de- partments. While this resistance is a source of frustration to every President, it is inherent in the design of the government. It is up to the politically appointed agency heads to ensure that the President's goals, designs, and policies are brought to bear on this permanent struc- ture. Circumventing the departments, perhaps by using the National Security Advisor or the NSC Staff to execute policy, robs the President of the experience and capacity resident in the departments. The President must act largely through them, but the agency heads must ensure that they execute the President's poli- cies in an expeditious and effective manner. It is not just the obligation of the National Securi- ty Advisor to see that the national security 1 As discussed in more detail in Part II, the statutory members of the National Security Council are the President, Vice Presi- dent, Secretary of State, and Secretary of Defense. By the phrase "National Security Council principals" or "NSC principals," the Board generally means those four statutory members plus the Di- rector of Central Intelligence and the Chairman of the Joint Chiefs of Staff. process is used. All of the NSC principals-and particularly the President-have that obligation. This tension between the President and the Executive Departments is worked out through the national security process described in the opening sections of this report. It is through this process that the nation obtains both the best of the creativity of the President and the learning and expertise of the national security departments and agencies. This process is extremely important to the President. His decisions will benefit from the advice and perspective of all the concerned de- partments and agencies. History offers numer- ous examples of this truth. President Kennedy, for example, did not have adequate consulta- tion before entering upon the Bay of Pigs inva- sion, one of his greatest failures. He remedied this in time for the Cuban missile crisis, one of his greatest successes. Process will not always produce brilliant ideas, but history suggests it can at least help prevent bad ideas from be- coming Presidential policy. The National Security Advisor. It is the National Security Advisor who is primarily responsible for managing this process on a daily basis. The job requires skill, sensitivity, and integrity. It is his responsibility to ensure that matters submit=ted for consideration by the Council cover the full range of issues on which review is required; that those issues are fully analyzed; that a full range of options is considered; that the pros- pects and risks of each are examined; that all relevant intelligence and other information is available to the principals; that legal consider- ations are addressed; that difficulties in imple- mentation are confronted. Usually, this can best be accomplished through interagency par- ticipation in the analysis of the issue and a pre- paratory policy review at the Deputy or Under Secretary level. The National Security Advisor assumes these responsibilities not only with respect to the President but with respect to all the NSC prin- cipals. He must keep them informed of the President's thinking and decisions. They should have adequate notice and an agenda for all meetings. Decision papers should, if at all pos- sible, be provided in advance. The National Security Advisor must also ensure that adequate records are kept of NSC consultations and Presidential decisions. This is - Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120061-9 essential to avoid confusion among Presidential.. advisors and departmental staffs about what was actually decided and what is wanted. Those records are also essential for conducting a -peri- odic review of a policy or initiative, and to learn from the past. It is the responsibility of the National Securi- ty Advisor to monitor policy implementation and to ensure that policies are executed in con- formity with the intent of the President's deci- sion. Monitoring includes initiating periodic re- assessments of a policy or operation, especially when changed circumstances suggest that the policy or operation no longer serves U.S. inter- ests. But the National Security Advisor does not simply manage the national security process. He is himself an important source of advice on national security matters to the President. He is not the President's only source of advice, but he is perhaps the one most able to see things from the President's perspective. He is unbur- dened by departmental responsibilities. The President is his only master. His advice is confi- dential. He is not subject to Senate confirma- tion and traditionally does not formally appear before Congressional committees. To serve the President well, the National Se- curity Advisor should present his own views, but he must at the same time represent the views of others fully and faithfully to the Presi- dent. The system will not work well if the Na- tional Security Advisor does not have the trust of the NSC principals. He, therefore, must not use his proximity to the President to manipu- late the process so as to produce his own posi- tion. He should not interpose himself between the President and the NSC principals. He should not seek to exclude the NSC principals from the decision process. Performing both these roles well is an essential, if not easy, task. In order for the National Security Advisor to serve the President adequately, he must have direct access to the President. Unless he knows first hand the views of the President and is known to reflect them in his management of the NSC system, he will be ineffective. He should not report to the President through some other official. While the Chief of Staff or others can usefully interject domestic political considerations into national security delibera- tions, they should do so as additional advisors to the President. Ideally, the National Security Advisor should not have a high public profile. He should not try to compete with the Secretary of State or the Secretary of Defense as the articulator of public policy. They, along with the President, should be the spokesmen for the policies of the Administration. While a "passion for anonymi- ty" is perhaps too strong a term, the National Security Advisor should generally operate off- stage. The NSC principals of course must have direct access to the President, with whatever frequency the President feels is appropriate. But these individual meetings should not be used by the principal to seek decisions or oth- erwise circumvent the system in the absence of the other principals. In the same way, the Na- tional Security Advisor should not use his scheduled intelligence or other daily briefings of the President as an opportunity to seek Pres- idential decision on significant issues. If the system is to operate well, the National Security Advisor must promote cooperation rather than competition among himself and the other NSC principals. But the President is ulti- mately responsible for the operation of this system. If rancorous infighting develops among his principal national security functionaries, only he can deal with them. Public dispute over external policy by senior officials undermines the process of decision-making and narrows his options. It is the President's responsibility to ensure that it does not take place. Finally, the National Security Advisor should focus on advice and management, not imple- mentation and execution. Implementation is the responsibility and the strength of the de- partments and agencies. The National Security Advisor and the NSC Staff generally do not have the depth of resources for the conduct of operations. In addition, when they take on im- plementation responsibilites, they risk compro- mising their objectivity. They can no longer act as impartial overseers of the implementation, ensuring that Presidential guidance is followed, that policies are kept under review, and that the results are serving the President's policy and the national interest. The NSC Staff. The NSC staff should be small, highly competent, and experienced in the making of public policy. Staff members should be drawn both from within and from Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 outside government. Those from within gov- ernment should come from the several depart- ments and agencies concerned with national se- curity matters. No particular department or agency should have a predominate role. A proper balance must be maintained between people from within and outside the govern- ment. Staff members should generally rotate with a stay of more than four years viewed as the exception. A large number of staff action officers orga- nized along essentially horizontal lines en- hances the possibilities for poorly supervised and monitored activities by individual staff members. Such a system is made to order for energetic self-starters to take unauthorized ini- tiatives. Clear vertical lines of control and au- thority, responsibility and accountability, are essential to good management. One problem affecting the NSC staff is lack of institutional memory. This results from the understandable desire of a President to replace the staff in order to be sure it is responsive to him. Departments provide continuity that can help the Council, but the Council as an institu- tion also needs some means to assure adequate records and memory. This was identified to the Board as a problem by many witnesses. We recognize the problem and have identi- fied a range of possibilities that a President might consider on this subject. One would be to create a small permanent executive secretar- iat. Another would be to have one person, the Executive Secretary, as a permanent position. Finally, a pattern of limited tenure and overlap- ping rotation could be used. Any of these would help reduce the problem of loss of insti- tutional memory; none would be practical unless each succeeding President subscribed to The guidelines for the role of the National Security Advisor also apply generally to the NSC staff. They should protect the process and thereby the President. Departments and agen- cies should not be excluded from participation in that process. The staff should not be imple- mentors or operators and staff should keep a low profile with the press. Principal Recommendation The model we have outlined above for the National Security Council system constitutes our first and most important recommendation. It includes guidelines that address virtually all' of the deficiencies in procedure and practice that the Board encountered in the Iran/Contra affair as well as in other case studies of this and previous administrations. We believe this model can enhance the per- formance of a President and his administration in the area of national security. It responds di- rectly to President Reagan's mandate to de- scribe the NSC system as it ought to be. The Board recommends that the proposed model be used by Presidents in their manage- ment of the national security system. Specific Recommendations In addition to its. principal recommendation regarding the organization and functioning of the NSC system and roles to be played by the participants, the Board has a number of specific recommendations. 1. The National Security Act of 1947. The flaws of procedure and failures of responsibility re- vealed by our study do not suggest any inad- equacies in the provisions of the National Secu- rity Act of 1947 that deal with the structure and operation of the NSC system. Forty years of experience under that Act demonstrate to the Board that it remains a fundamentally sound framework for national security decision- making. It strikes a balance between formal structure and flexibility adequate to permit each President to tailor the system to fit his needs. As a general matter, the NSC Staff should not engage in the implementation of policy or the conduct of operations. This compromises their oversight role and usurps the responsibil- ities of the departments and agencies. But the inflexibility of a legislative restriction should be avoided. Terms such as "operation" and "im- plementation" are difficult to define, and a leg- islative proscription might preclude some future President from making a very construc- tive use of the NSC Staff. Predisposition on sizing of the staff should be toward fewer rather than more. But a legis- lative restriction cannot forsee the require- ments of future Presidents. Size is best left to the discretion of the President, with the admo- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 nition that the role of the NSC staff is to review, not to duplicate or replace, the work of the departments and agencies. We recommend that no substantive change be made in the provisions of the National Se- curity Act dealing with the structure and op- eration of the NSC system. 2. Senate Confirmation of the National Security Ad- visor. It has been suggested that the job of the National Security Advisor has become so im- portant that its holder should be screened by the process of confirmation, and that once con- firmed he should return frequently for ques- tioning by the Congress. It is argued that this would improve the accountability of the Na- tional Security Advisor. We hold a different view. The National Secu- rity Advisor does, and should continue, to serve only one master, and that is the Presi- dent. Further, confirmation is inconsistent with the role the National Security Advisor should play. He should not decide, only advise. He should not engage in policy implementation or operations. He should serve the President, with no collateral and potentially diverting loyalties. Confirmation would tend to institutionalize the natural tension that exists between the Sec- retary of State and the National Security Advi- sor. Questions would increasingly arise about who really speaks for the President in national security matters. Foreign governments could be confused or would be encouraged to engage in "forum shopping.". Only one of the former government officials interviewed favored Senate confirmation of the National Security Advisor. While consultation with Congress received wide support, confirma- tion and formal questioning were opposed. Several suggested that if the National Security Advisor were to become a position subject to confirmation, it could induce the President to turn to other internal staff or to people outside government to play that role. We urge the Congress not to require Senate confirmation of the National Security Advisor. 3. The Interagency Process. It is the National Se- curity Advisor who has the greatest interest in making the national security process work, for it is this process by which the President obtains the information, background, and analysis he requires to make decisions and build support for his program. Most Presidents have set up interagency committees at both a staff and policy level to surface issues, develop options, and clarify choices. There has typically been. a struggle for the chairmanships of these groups between the National Security Advisor and the NSC staff on the one hand, and the cabinet secretaries and department officials on the other. Our review of the operation of the present system and that of other administrations where committee chairmen came from the depart-. ments has led us to the conclusion that the system generally operates better when the com- mittees are chaired by the individual with the greatest stake in making the NSC system work. We recommend that the National Security Advisor chair the senior-level committees of the NSC system. 4. Covert Actions. Policy formulation and im- plementation are usually managed by a team of experts led by policymaking generalists. Covert action requirements are no different, but there is a need to limit, sometimes severely, the number of individuals involved. The lives of many people may be at stake, as was the case in the attempt to rescue the hostages in Tehran. Premature disclosure might kill the idea in embryo, as could have been the case in the opening of relations with China. In such cases, there is a tendency to limit those involved to a small number of top officials. This practice tends to limit severely the expertise brought to bear on the problem and should be used very sparingly indeed. The obsession with secrecy and preoccupa- tion with leaks threaten to paralyze the govern- ment in its handling of covert operations. Un- fortunately, the concern is not misplaced. The selective leak has become a principal means of waging bureaucratic warfare. Opponents of an operation kill it with a leak; supporters seek to build support through the same means. We have witnessed over the past years a sig- nificant deterioration in the integrity of proc- ess. Rather than a means to obtain results more Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 satisfactory than the position of any of the indi- vidual departments, it has frequently become something to be manipulated to reach a specif- ic outcome. The leak becomes a primary instru- ment in that process. This practice is destructive of orderly gov- ernance. It can only be reversed if the most senior officials take the lead. If senior decision- makers set a clear example and demand com- pliance, subordinates are more likely to con- form. Most recent administrations have had careful- ly drawn procedures for the consideration of covert activities. The Reagan Administration established such procedures in January, 1985, then promptly ignored them in their consider- ation of the Iran initiative. before the National Security Council. The At- torney General is currently a member of the Council by invitation and should be in a posi- tion to provide legal advice to the Council and the President. It is important that the Attorney General and his department be available to interagency deliberations. The Justice Department, however, should not replace the role of counsel in the other depart- ments. As the principal counsel on foreign af- fairs, the Legal Adviser to the Secretary of State should also be available to all the NSC participants. Of all the NSC participants, it is the Assistant for National Security Affairs who seems to have had the least access to expert counsel familiar with his activities. We recommend that each administration formulate precise procedures for restricted consideration of covert action and that, once formulated, those procedures be strictly ad- hered to. 5. The Role of the CIA. Some aspects of the Iran arms sales raised broader questions in the minds of members of the Board regarding the role of CIA. The first deals with intelligence. The NSC staff was actively involved in the preparation of the May 20, 1985, update to the Special National Intelligence Estimate on Iran. It is a matter for concern if this involvement and the strong views of NSC staff members were allowed to influence the intelligence judg- ments contained in the update. It is also of concern that the update contained the hint that the United States should change its existing policy and encourage its allies to provide arms to Iran. It is critical that the line between intel- ligence and advocacy of a particular policy be preserved if intelligence is to retain its integrity and perform its proper function. In this in- stance, the CIA came close enough to the line to warrant concern. We emphasize to both the intelligence com- munity and policymakers the importance of maintaining the integrity and objectivity of the intelligence process. 6. Legal Counsel. From time to time issues with important legal ramifications will come The Board recommends that the position of Legal Adviser to the NSC be enhanced in stature and in its role within the NSC staff. 7. Secrecy and Congress. There is a natural ten- sion between the desire for secrecy and the need to consult Congress on covert operations. Presidents seem to become increasingly con- cerned about leaks of classified information as their administrations progress. They blame Congress disproportionately. Various cabinet officials from prior administrations indicated to the Board that they believe Congress bears no more blame than the Executive Branch. However, the number of Members and staff involved in reviewing covert activities is large; it provides cause for concern and a convenient excuse for Presidents to avoid Congressional consultation. We recommend that Congress consider re- placing the existing Intelligence Committees of the respective Houses with a new joint committee with a restricted staff to oversee the intelligence community, patterned after the joint Committee on Atomic Energy that existed until the mid-1970s. 8. Privatizing National Security Policy. Careful and limited use of people outside the U.S. Gov- ernment may be very helpful in some unique cases. But this practice raises substantial ques- tions. It can create conflict of interest prob- lems. Private or foreign sources may have dif- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ferent policy interests or personal motives and may exploit their association with a U.S. gov- ernment effort. Such involvement gives private and foreign sources potentially powerful lever- age in the form of demands for return favors or even blackmail. The U.S. has enormous resources invested in agencies and departments in order to conduct the government's business. In all but a very few cases, these can perform the functions needed. If not, then inquiry is required to find out why. We recommend against having implementa- tion and policy oversight dominated by inter- mediaries. We do not recommend barring limited use of private individuals to assist in United States diplomatic initiatives or in covert activities. We caution against use of such people except in very limited ways and under close observation and supervision. Epilogue If but one of the major policy mistakes we examined had been avoided, the nation's histo- ry would bear one less scar, one less embar- rassment, one less opportunity for opponents to reverse the principles this nation seeks to preserve and advance in the world. As a collection, these recommendations are offered to those who will find themselves in sit- uations similar to the ones we reviewed: under stress, with high stakes, given little time, using incomplete information, and troubled by pre- mature disclosure. In such a state, modest im- provements may yield surprising gains. This is our hope. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Appendix A THE WHITE HOUSE Office of the Press Secretary For Immediate Release December 1, 1986 President's Special Review Board By the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish, in accordance with the Federal Advisory Committee Act, as amended (5 U.S.C. App. I), a Special Review Board to review activities of the National Security Council, it is hereby ordered as follows: Section 1. Establishment. (a) There is established the President's Special Review Board on the future role of the National Security Council staff. The Board shall consist of three members appointed by the President from among persons with extensive experience in foreign policy and national security affairs. (b) The President shall designate a Chairman from among the members of the Board. Sec. 2. Functions. (a) The Board shall conduct a comprehensive study of the future role and procedures of the National Security Council (NSC) staff in the development, coordination, oversight, and conduct of foreign and national security policy; review the NSC staffs proper role in operational activities, especially extremely sensitive diplomatic, military, and intelligence missions; and provide recommendations to the President based upon its analysis of the manner in which foreign and national security policies established by the President have been implemented by the NSC staff. (b) The Board shall submit its findings and recommendations to the President within 60 days of the date of this Order. Sec. 3. Administration. (a) The heads of Executive departments, agencies, and independent instrumentalities, to the extent permitted by law, shall provide the Board, upon request, with such information as it may require for purposes of carrying out its functions. (b) Members of the Board shall receive compensation for their work on the Board at the daily rate specified for GS-18 of the General Schedule. While engaged in the work of the Board, members appointed from among private citizens of the United States may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by law for persons serving intermit- tently in the government service (5 U.S.C. 5701-5707). (c) To the extent permitted by law and subject to the availability of appropria- tions, the Office of Administration, Executive Office of the President, shall provide the Board with such administrative services, funds, facilities, staff, and other support services as may be necessary for the performance of its functions. Sec. 4. General Provision. The Board shall terminate 30 days after submitting its report to the President. THE WHITE HOUSE, December 1, 1986. 0 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Note In the following narrative, citations to the Board's record are indicated in parentheses. Where the citation is to a name, for ex- ample "(McFarlane (1) 6)", it means Robert C. McFarlane's first interview with the Board at page 6 of the transcript. The same page in Mr. McFarlane's second interview would be designated by "(McFarlane (2) 6)." Representatives of those departments concerned with the na- tional security of the United States reviewed the manuscript in order to declassify it. The criteria for deletions in the interests of the national security were: (1) protection of intelligence sources and methods; (2) protection of negotiations and relations with third countries; and (3) protection of life. The Board finds that these criteria have been reasonably applied. 173-298 0-87--3 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Appendix B The Iran/Contra Affair: A Narrative Quis custodiet ipsos custodes. Juvenal, Satires, VI, 347 Introduction In 1985, the United States began a process that eventually included the shipment of ad- vanced weapons unobtainable on the interna- tional arms market to Iran for cash and the freedom of Americans kidnapped and held hos- tage in Lebanon. Israel also sold such weapons to Iran, and the United States resupplied Israel, at least in part. In some instances, Iran appar- ently arranged for the release of American citi- zens, and perhaps nationals of other countries, kidnapped in Lebanon. These transactions in- volved American, Iranian, and Israeli middle- men, and occurred at a time when the public policy of the United States strongly deprecated arms shipments to Iran and ransoming hos- tages. Large sums changed hands. Large sums are unaccounted for, and may have been divert- ed to guerrilla groups in various countries, including the resistance in Nicaragua, or to middlemen. A number of elements appear to have con- verged at the origin of these transactions. Without assigning priority, they include: (1) the strategic importance of Iran and concern of in- dividuals in the United States government to restore something resembling normal relations with that country; (2) a long history of Russian and Soviet designs on Iran, and the perception that the Soviet invasion of Afghanistan repre- sented an episode in this history; (3) evidence of Iranian influence with, and control over, groups engaging in terrorist acts against citi- zens and interests of the United States, its allies and friends; (4) Americans held hostage in Leb- anon by such groups; (5) Iranian efforts to obtain advanced weapons for use against Iraq; (6) Israel's interest, for a number of reasons, in selling such weapons to Iran with the approval or acquiescence of the United States; (7) the perception by international arms dealers that the American concern about the future course of Iran and Americans held hostage, together with Iran's wish to buy weapons controlled by the United States, offered an opportunity for quick, sure profits. 1. Background On January 16, 1979, the Shah was over- thrown, ending an intimate Iranian-American relationship over twenty-five years old. Mutual hostility and tension characterized American re- lations with the Khomeini government, which the seizure on November 4, 1979, of the Amer- ican Embassy in Tehran intensified. From No- vember 12 to 14, the United States adopted economic sanctions culminating in the decision on the 14th to "block" all Iranian government property and interests in the United States. Ira- nian oil could no longer be purchased, nor weapons shipped, even those previously pur- chased by Iran. (Order of 11/79, confirmed by Executive Order, 4/17/80) The United States broke diplomatic relations with Iran on April 7, 1980, and imposed further economic sanctions. Some six weeks after the Embassy seizure, the Soviet Union invaded Afghanistan. Since short- ly thereafter, the United States and Iran have pursued compatible policies towards the Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Afghan resistance. On September 22, 1980, Iraq attacked Iran. The hostage crisis begun November 4, 1979, continued until the end of the Carter Adminis- tration. At that time, direct, formal communica- tions between Washington and Tehran re- sumed with the establishment, pursuant to the Algiers Accord of January 19, 1981, of the Iran-United States Claims Tribunal at the Hague in 1981. That agreement partially lifted economic sanctions, but the arms embargo was reinforced. In 1983, the United States helped bring to the attention of Tehran the threat in- herent in the extensive infiltration of the gov- ernment by the communist Tudeh Party and Soviet or pro-Soviet cadres in the country. Using this information, the Khomeini govern- ment took measures, including mass execu- tions, that virtually eliminated the pro-Soviet infrastructure in Iran. A. Intellectual Threads in the NSC Staff: 1984 From the spring of 1982 through the summer of 1984, interagency groups attempted to formulate "a security strategy" for South- west Asia. (Teicher 6-7) At the beginning of 1984, Geoffrey Kemp, Senior Director for Near East and South Asian Affairs on the staff of the National Security Council ("NSC") and the principal NSC staff officer responsible for the Persian Gulf, (id at 6), wrote a memorandum to Robert C. McFarlane, Assistant to the Presi- dent for National Security Affairs and head of the NSC staff, recommending that the Adminis- tration reevaluate its attitude towards Iran. He viewed the Khomeini government as a menace to American interests, and suggested a revival of covert operations against it. According to Kemp, Tehran's politics and policies enhanced Syria's standing among Arab states, and threat- ened western access to Persian Gulf oil. Kho- meini's Iran was also believed to have engaged directly or indirectly, in terrorist acts against citizens and interests of the United States, its friends and allies. He reported that exiled Ira- nians, with whom he regularly communicated, hoped that, with foreign help, they might in- stall. a pro-Western government. Suggestions of divisions in the country and support from Saudi Arabia for the exiles encouraged Kemp to submit his proposal. (Kemp to McFarlane, 1/13/84) Kemp prepared his memorandum during a period in which a number of foreign nationals living in Lebanon were kidnapped by groups known to have important ties to Iran. Further, the United States determined that Iran had played a role in hijackings and bombings, nota- bly the bombings of the American Embassy and of the Marines barracks in Beirut on October 23, 1983. Evidence of Iranian complicity in such events caused the United States to desig- nate Iran a sponsor of international terrorism and to impose additional controls on exports to Iran on January 23, 1984. Among those kid- napped after Kemp submitted his memoran- dum to McFarlane was William Buckley, CIA Chief of Station in Beirut, seized on March 16, 1984. Buckley eventually died in captivity. On August 31, 1984, McFarlane formally re- quested an interagency analysis of American re- lations with Iran after Khomeini. (NSSD 5-84, 8/31/84; Teicher 7) According to the detailed interagency study completed in October 1984, Khomeini's death was probably a precondition to changes in Iranian policies and the realistic prospect of improved Iranian-American rela- tions. The study, which incorporated the analy- sis of a Special National Intelligence Estimate ("SNIE") then in preparation on Iran, conclud- ed that the possibility of resuming arms ship- ments to Iran depended on Iran's willingness to restore formal relations, which itself turned on Iran's perception of the importance of such shipments and the American perception of the impact of such shipments on the regional bal- ance of power. (Enclosure to Hill to McFarlane, 10/19/84) The study conveyed an impression of relative American powerlessness to affect events in Iran, powerlessness that would con- tinue indefinitely. (Id.) The CIA reached a similar conclusion with regard to the utility of covert action in Iran to improve the United States position. The CIA Deputy Director of Operations considered the Marxist Mujaheddin E Khalq to be well orga- nized, influenced by the Soviets, and likely to succeed Khomeini. (DDO to Poindexter, 12/ 11/84) The State Department distilled these views into a draft National Security Decision Directive ("NSDD") at the end of 1984. This document Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 would have directed the United States govern- ment to maintain and expand its capability to exploit opportunities that might arise in Iran, but reaffirmed, absent changes in the Iranian situation, existing policies. Thus, the draft NSDD would continue the policy of discourag- ing arms transfers to Iran. (Draft NSDD 5, in Hill to McFarlane, 12/14/84) Howard Teicher, Senior Director for Political-Military Affairs on the NSC staff, told the Board that these inter- agency efforts "produced no ideas which any of us involved considered to be of great value in terms of significantly affecting our posture in the region." (Teicher 8) B. Further 1984 Threads: Iran, Weapons, and Hostages By the summer of 1984, Iranian purchasing agents were approaching international arms merchants with requests for TOW missiles. The Chief of the Near East Division of the CIA's Directorate of Operations ("C/NE") told the Board. We have in the DDO probably 30 to 40 requests per year from Iranians and Iranian exiles to provide us with very fancy intelligence, very important in- ternal political insights, if we in return can arrange for the sale of a dozen Bell helicopter gunships or 1,000 TOW missiles or something else that is on the contraband list. (C/NE (2) 98) By November 1984, Iranians -with connec- tions to the Tehran government were indicat- ing a connection between such weapons and the release of Americans kidnapped in Leba- non. Theodore Shackley, a former CIA officer, reported that, in meetings November 19-21, 1984, in Hamburg, West Germany, General Manucher Hashemi, former head of SAVAK's Department VIII (counterespionage), intro- duced him to Manuchehr Ghorbanifar. Ha- shemi said Ghorbanifar's contacts in Iran were "fantastic." ("American Hostages in Lebanon" at 2 (11/22/84)) Ghorbanifar was already known to the CIA, and the Agency did not have a favorable impression of his reliability or veracity. (Cave 3-5, 44; C/NE (2) passim) Shack- ley reported that Ghorbanifar had been a SAVAK agent, was known to be an internation- al dealmaker, and, generally, an independent man, difficult to control. Ghorbanifar told Shackley that he and other Iranians wanted to help shape Iran's future policies and bring Tehran closer to the West. He feared that Iran would become a Soviet satellite within the near term- three to five years-if he and people like General Hashemi did not do something to stem the tide. He rhe- torically asked what can we do, for de- spite our ability to work with the "moderates" in Iran, we can't get a meaningful dialogue with Washington. According to Ghorbanifar, it is Presi- dent Reagan who has the destiny of the Iranian people in his hand. When at this juncture Ghorbanifar was asked if he had tried to open a dialogue with the Americans, he said, "We know the CIA in Frankfurt. They want to treat us like kleenex-use us for their pur- pose and then throw us out the window. We can't work with them as they are unreasonable and unprofes- sional. In fact, if you check on me with them, they will tell you I am unreason- able and undisciplined." ("American Hostages in Lebanon," supra, at 2) To prove that he and Hashemi had influen- tial contacts in Iran, Ghorbanifar suggested that Iran would be willing to trade some Soviet equipment captured in Iraq for TOW missiles. He further suggested the possibility of a cash ransom paid to Iran for the four Americans kidnapped in Lebanon (including Buckley), -who, he said after making telephone calls, were alive. The. transaction could be disguised by using Ghorbanifar as a middleman. Shackley reported that Ghorbanifar needed a response by December 7, 1984. According to Shackley, later that month, the State Department in effect replied: "'thank you but we will work this problem out via other channels.' " ("American Hostages in Lebanon" at 1 (6/7/85).1 ' An unattributed and undated note analysed meetings involv- ing Hashemi, Shackley, and Iranians at about this time and in March 1985, when the same topics noted by Shackley were dis- cussed. This note added that "[w]e determined that the Iranan [sic] side was only interesed [sic] in money." See infra p. B 11. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 II. NSC Staff Diplomacy and Thinking: January July 1985. At the beginning of 1985, the Administration adopted new procedures for approving and co- ordinating covert actions. These were meticu- lously set forth in elaborate detail in a National Security Decision Directive signed by the Presi- dent. They included comprehensive interagen- cy evaluation of proposed covert actions, co- ordinated review of actions undertaken, and notification of Congress in accordance with statute. (NSDD 159, 1/18/85) The NSDD also specified that the President would approve in writing all covert action Findings made pursu- ant to section 501 of the National Security Act. A. The NSC Staff in Action Early in 1985, the NSC staff undertook ac- tions aimed at the least to improve the govern- ment's knowledge about Iran. Michael Ledeen, who, from November 1984 to December 1986, was an NSC consultant on terrorism and cer- tain Middle East questions, including Iran, told the Board that the NSC staff regarded Iran as a strategically important place about which the United States had inadequate information. (Ledeen (1) 7-8) McFarlane was prepared in January to send Ledeen to Europe on a mission of inquiry. In this connection, Rear Admiral Poindexter, McFarlane's deputy, wrote a letter of introduction saying Ledeen "has the com- plete confidence of Bud McFarlane and myself." (Poindexter to Schurer, 1/4/85. See also McFarlane to Grossouvre, 1/4/85) In the early spring of 1985, Ledeen reported to McFarlane a discussion about Iran he had had with a European intelligence official who be- lieved the situation there was more fluid than the United States government seemed to think. Ledeen's interlocutor suggested speaking to the Israelis as the best, quick way to learn Ledeen told the Board that Ghorbanifar had tried for some time to establish contact with the United States. "[H]aving failed to reach us at the front door, he went around to the side door." Shackley transmitted his report to General Walters. (Ledeen (1) 41-42) Ledeen-and Shackley separately told the Board that, in May 1985, Shackley-told Ledeen that he had no response from Walters. In June 1985, he gave the report, together with an update, to Ledeen who, without reading it, he said, passed it to North with the report "that Shackley had had a contact with an Iranian who had said he thought he could ransom Buckley." (Ledeen (1) 43); Ledeen (2) 2-6; Shackley 13-24) about events in Iran. According to Ledeen, McFarlane suggested that I talk to Peres privately and ask him whether Israel had better informa- tion about Iran than we had, whether Israel had enough information about Iran, about Iranian terrorism, about Iran's role in international terrorism, all these various subjects, so that one could evaluate a ra- tional policy and, if so, whether they would be willing to share that information with us. (Ledeen (1) 8-9) 2 Documents suggest a somewhat different origin and purpose for the trip. Donald Fortier, Special Assistant to the President and Senior Director for Political-Military Affairs, reported to McFarlane on April 9, that Ledeen told him on April 8 that McFarlane was prepared to ap- prove Ledeen's travelling to Israel (apparently a previous trip had been cancelled) if Fortier, Covey, and Teicher approved. Fortier won- dered if Ledeen had accurately represented McFarlane's view. Fortier, Covey, and Teicher. disapproved of using Ledeen as the govern- ment's "primary channel for working the Iran issue with foreign governments, and we think you should probably should [sic] not provide a formal letter." (Fortier PROF note to McFar- lane, 4/9/85, 10:22:14) On the other hand, they thought he could usefully carry two mes- sages to Prime Minister Peres, whom Ledeen came to know when, as Secretary of State Haig's advisor, he had responsibility for dealing with the Socialist International. (Ledeen (1) 6) 1) the White House feels it is essential to begin to develop a more serious and co- ordinated strategy for dealing with the Ira- nian succession crisis-a crisis that is almost certain to turn on outside involve- ment of one kind or another; and 2) we would like his ideas on how we could co- operate more effectively. The last point is 2 Ledeen told the Board that McFarlane approved all his trips, except for his vacation in Israel in July-August 1985, and the NSC paid his expenses. Ledeen said he considered himself an employee of the United States while on these trips, and made clear to his interlocutors that he had no authority to negotiate, but would "report fully and accurately everything that transpired in these discussions and that I would, if asked, report and com- municate fully and accurately back. to them whatever decisions were made in Washington." (Ledeen T-15) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 a hard one for us to ask our intelligence community to communicate, since we sus- pect they may be part of the problem. We don't think Mike should be the one to ask Peres for detailed operational information; he probably doesn't know, and even if he did, this should be reserved for official channels once we have arrived at ideas for restoring better cooperation. (Fortier PROF note to McFarlane, 4/9/85, 10:22:14) On his own initiative, on April 9, Ledeen made arrangements to see Prime Minis- ter Peres. Fortier and Teicher thought it wise for Teicher to sound out Nimrod Novik, the Prime Minister's Political Advisor, to see if Ledeen would be welcome. (Fortier PROF note to McFarlane, 4/9/85, 11:41:22) McFarlane ap- proved the check with Novik. "If it turns up negative, simply tell Mike that the meeting is not sponsored by us and he should not so rep- .resent." (McFarlane PROF note to Fortier, 4/ 9/85, 12:45:22) He also wrote Fortier: Yes I think it is entirely worthwhile to co- operate closely with Iran [sic: Israel] in our planning for Iranian succession. . . . As a separate matter I want to talk to Shultz so that he is not blindsided when Sam Lewis [Ambassador to Israel] reports-as he will surely find out-about Mike's wanderings.3 So for the moment let's hold on the Ledeen aspect. I will get back to you. I do consider planning for the succfession [sic] to be one of our greatest failures and vul- nerabilities so I am very glad you are turn- ing to it. (McFarlane PROF note to Fortier, 4/9/85, 11:22:47) Ledeen traveled to Israel and met Prime Minister Peres on May 4 or 5, 1985. (Ledeen (1) 10) Ledeen told the Board that, "in es- sence," Prime Minister Peres said that while he thought their informa- tion was probably better than ours, he did not consider it satisfactory and he didn't feel that it was sufficient for them to base any kind of serious Iran policy, but that he agreed that it was an important matter and 8 Apparently Ledeen thought he could make the trip without Ambassador Lewis finding out about it. McFarlane doubted it was possible. (McFarlane PROF note to Fortier, 4/9/85, 12:45:22) said that they would be happy to work with us to try to develop better information in all these areas-the internal Iranian situa- tion, the Iran role in terror, general inter- national terrorist questions and so forth. So he constituted a group of people out- side the government, not government offi- cials, to work with us to study the Iran question and the Iranian terrorist issue. The agreement was that each of us would try to find out what our respective govern- ments knew about Iran. We would then sit down, compare notes, and see if possibly by putting them together we might be able to develop some kind of useful picture. (Id. at 10-11) In his second interview with the Board, Ledeen added that the Prime Minister was happy to work together to try to devel- op better information about Iran, but he, contrary to all these newspaper reports, which continue to drive me crazy and I don't know where they come from, there was no discussion of contacts with Iran, none. There was no discussion of hostages. And except for this one final point where he said we have received a request from the Iranian government to sell them this quantity of materiel, we will not do it with- out explicit American approval, will you please raise it with McFarlane when you get back to Washington and tell me shall we do it or shall we not, there was no dis- cussion of weapons or trade or relations or anything. It was simply a discussion of what could be learned about Iran and how could we better work together to understand that situation. [T]here was no discussion of policy at all between me and Peres. It was simply a dis- cussion of information, and then hypotheti- cally if there were information and they had policy recommendations to make, then okay. But we never got to them. It was purely a research trip. (Ledeen (2) 10-11) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Shlomo Gazit, President of Ben Gurion Uni- versity and a former chief of Israeli intelli- gence, led the Israeli team. Gazit still had good relations with Israeli intelligence and could direct both the military and Mossad to provide information. Ledeen did not know the other Is- raelis, but assumed that David Kimche, Direc- tor General of the Israeli Foreign Ministry, worked on this matter. (Ledeen (1) 11) When Ledeen returned to Washington on May 13, he called Fortier with the news of "very positive feedback. [Ledeen] will brief me tomorrow on what that really means." (Fortier PROF note to Poindexter, 5/13/85, 18:12:20) According to Ledeen, during the May conversa- tion, Prime Minister Peres also asked him to ask McFarlane if the United States would ap- prove an arms shipment to Iran. Ledeen re- called that "[i]t was either ammunition for artil- lery pieces or some quantity of artillery pieces, but it had to do with artillery." (Ledeen (2) 13) Israel would not ship it to Iran "without explic- it American approval." (Ledeen T-2) Ledeen said McFarlane subsequently authorized him to tell the Prime Minister "it's okay, but just that and nothing else." (Id.) B. Intellectual Formulations: The NSC and Intelligence Estimates After Ledeen reported to McFarlane on the trip, McFarlane asked Fortier to direct the CIA to prepare a special intelligence estimate on Iran. (Ledeen (1) 11-12) Graham Fuller, Na- tional Intelligence Officer for Near East and South Asia, and Teicher participated in this effort. Fuller told the Board that he "regularly" saw Teicher who shared a lot of my feelings about our stra- tegic bind vis a vis Iran. And there were others as well in Government, but Howard was the one I was most well aware of in that regard, who felt that we should at least be working towards [sic] an expanded policy towards Iran, expanded in the broadest sense, more than a purely nega- tive one of no arms and slap down on ter- rorism. It was in fact that NSDD that in the end got nowhere that was part of the ra- tionale for the estimate that we did in '85. (Fuller 28-29)4 On May 17, 1985, Fuller submitted a five- page memorandum to William Casey, Director of Central Intelligence, entitled "Toward a Policy on Iran." Fuller began his analysis as fol- lows: 1. The US faces a grim situation in devel- oping a new policy toward [sic] Iran. Events are moving largely against our in- terests and we have few palatable alterna- tives. In bluntest form, the Khomeini regime is faltering and may be moving toward a moment of truth; we will soon see a struggle for succession. The US has almost no cards to play; the USSR has many. Iran has obviously concluded that whether they like Russia and Communism or not, the USSR is the country to come to terms with: the USSR can both hurt and help Iran more than the US can. Our urgent need is to develop a broad spec- trum of policy moves designed to give us some leverage in the race for influence in Tehran. (Fuller to DCI/DDCI, "Toward a Policy on Iran," 5/17/85) Fuller then noted that the United States and Soviet Union both supported Iraq, but for different reasons, and this situa- tion was inherently unstable. He wrote that both countries "lack our preferred access to Iran. Whoever gets there first is in a strong po- sition to work towards [sic] the exclusion of the other." (Id. at 1) Fuller reported that the intel- ligence community monitored "Soviet progress toward developing significant leverage in Tehran," progress, which, however uneven, merited a response given the stakes. (Id.) He then analyzed American policy. The United States had two attitudes towards Iran. First, it was prepared to respond with force if Iran was involved in a terrorist attack. Second, it strove to deny arms to Iran. Fuller believed that these "twin pillars" were no longer sensible because they were adopted to 4 On May 13, 1985, Fortier informed Poindexter that "[w]e have a draft [of the NSDD?]. I asked Howard and Steve [Rosen] to rework it. I will give you a copy of what we have and of the suggestions I gave them on how it could [be] improved. . . . We have also done a lot of additional work on outlining require- ments for the SNIE." (Fortier PROF note to Poindexter, 5/13/ 85, 18:12:20) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 deal with a vacuum in Iran and a strong Kho- meini. These conditions no longer existing, Fuller concluded, the policy pillars had become entirely negative "and may now serve to facili- tate Soviet interests more than our own." (Id. at 2) While acknowledging the difficulty of formu- lating alternatives, he thought that [i]t is imperative, however, that we perhaps think in terms of a bolder-and perhaps riskier policy which will at least ensure greater US voice in the unfolding situation. Right now-unless we are very lucky indeed-we stand to gain nothing, and lose more, in the outcome of developments in Iran, which are all outside our control. (Id. at 3) "Nobody has any brilliant ideas about how to get us back into Tehran," Fuller wrote, (id.); he then analysed a number of alternative courses, including helping Iraq to win the war and en- couraging friendly states to make arms avail- able to Iran as a means for gaining influence in Tehran. He noted that an Iraqi victory might lead to the establishment of an even more radi- cal regime in Tehran. Attacking Iran's radical ally Libya would demonstrate our resolve and, possibly, remove Qadhafi. Iran's other radical ally, Syria, could only be pressured by Israel, which had no wish for conflict at this time. He thought demonstrating to Iranians that we were not hostile by withdrawing our fleet from the Persian Gulf and making public statements about our friendly intentions, for example, might strengthen "Iranian moderates-and op- portunists;" it also might produce derision in Tehran. The best course, he concluded, was to have friendly states sell arms that would not affect the strategic balance as a means of show- ing Tehran that it had alternatives to the Soviet Union. (Id. at 5) Were the Soviets to gain in Iran, we would have to strengthen our commit- ments to Turkey and Pakistan, as they are logi- cal next Soviet targets. (Id. at 4) The Director of Central Intelligence provided a copy of this memorandum to the Secretary of State on June 4, 1985. (Note on routing sheet) On May 20, 1985, the Intelligence Communi- ty circulated a revision of its SNIE of October 1984 on Iran (SNIE 34-84, Iran: The Post Kho- meini Era) According to Fuller, I think the [intelligence] community had very definitely felt that most of the Iranian regime perceived us as implacably hostile towards an Islamic republic in principle, and that maybe there were some gestures that could be made that would suggest that we were rather more sophisticated in our approach to it than simply that. (Id. at 11) The first SNIE and the update tried to pre- dict Iran's course over the next six to twelve months, and acknowledged the difficulty that effort implied. Its conclusions were consistent with Fuller's earlier memo to the DCI. The Community expected Khomeini's health to con- tinue to decline, and predicted that Iran would soon enter a period of instability, in part the result of the regime's declining popularity, the growth of private armies, and jockeying for po- litical advantage by competing groups. One could confidently expect "serious instability" before Khomeini's death. Already the Commu- nity saw signs of opposition to the radicals among industrial workers. The prospects for the Communist left (the Tudeh Party and Mu- jahedin-e Khalq) were hard to estimate, but the Soviets were discreetly keeping their options open by allowing their East European allies to sell weapons to Iran while the U.S.S.R. publicly supported Iraq. "Tehran's leadership seems to have concluded," the Community wrote, "that improvement of relations with the USSR is now essential to Iranian interests; any improvement of ties to the United States is not currently a policy option." (Iran: Prospects for Near-Term In- stability at 5 (5/20/85) (to holders of SNIE 34-84)) Moscow would offer a number of in- centives in return for Iran's ceasing to support the Afghan resistance. The United States cur- rently lacked an ability to counter Soviet moves. As a whole, however, the West could take steps to improve its position. The United States is unlikely to be able to directly influence Iranian events, given its current lack of contact or presence in Iran. European states and other friendly states- including Turkey, Pakistan, China, Japan, and even Israel-can provide the next most valuable presence or entree in Iran to help protect Western interests. The degree to which some of these states can fill a Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 military gap for Iran will be a critical meas- ure of the West's ability to blunt Soviet in- fluence. These states can also play a major role in the economic life of the country, lessening its isolation and providing alter- natives to Soviet influence or that of the radical state. (Id. at 12) According to Fuller, nothing in the May 1985 SNIE proved to be "highly contro- versial" in interagency deliberations. (Fuller 22) Teicher told the Board that this estimate became the basis for a new draft NSDD on Iran. (Teicher 8-9) On May 28, Fortier wrote McFarlane: We spent the better part of the day work- ing on the Iran NSSD [sic]. I have Dennis [?Ross, at that time an NSC consultant] here looking at the recent spate of Soviet activity and the levers we may have arising out of the war and other circumstances. I think we need about one more full day before we send up a draft for you and John [?Poindexter] to review. We also just got a bootleg copy of the draft SNIE. We worked closely with Graham Fuller on the approach, and I think it really is one of the best yet. Iran may come up in the breakfast tomorrow. If pressed for action you can credibly promise paper within the next few days. I also think the Israeli option is one we have to pursue, even though we may have to pay a certain price for the help. I'm not sure though that we have the right interlocutor. Mike has a call into me now. His message is that he needs to see me ur- gently to follow up on his weekend conver- sation and to get a new plane ticket. Would appreciate guidance and substantive feedback. Thanks. (Fortier PROF note to McFarlane, 5/28/85 18:52:14) On June 11, 1985, Fortier and Teicher sub- mitted to McFarlane a draft NSDD on Iran that Teicher had worked on for much of May. They described it as provocative. It basically calls for a vigorous policy designed to block Soviet advances in the short-term while building our leverage in Iran and trying to restore the U.S. posi- tion which existed under the Shah over the longer-term. This would require a sharp departure from ongoing . . . measures, most notably the supply of Western mili- tary hardware, U.S. initiative to dialogue with Iranian leaders. . . . Because of the political and bureaucratic sensitivities, we believe that it would be best for you to provide a copy of the NSDD draft only to Shultz and Weinberger (eyes only) for their comments. Whether to proceed with a restricted SIG, NSPG or other forum would depend on their reac- tions. (Fortier and Teicher to McFarlane, 6/11/85) Teicher's draft NSDD, which had incorporat- ed some comments of Vincent Cannistraro, Senior Director for Intelligence and the NSC staff member principally responsible for moni- toring covert operations, set forth these points at length. Mirroring the analysis by Fuller, the NSDD defined immediate United States inter- ests as: (1) Preventing the disintegration of Iran, and preserving Iran as an independent buffer be- tween the Soviet Union and the Persian Gulf; (2) Limiting Soviet political opportunities in Iran, while positioning the United States to adjust to changes; (3) Maintaining access to Persian Gulf oil and transit through the Gulf of Hormuz; (4) Ending Iranian sponsorship of terrorism, and policy of destabilizing neighboring states; Longer-term goals were: (1) Restoration of Iran's moderate and con- structive role in the non-Communist political community, the Persian Gulf region, and "the world petroleum economy;" (2) Continued Iranian resistance to Soviet ex- pansion (in particular, in Afghanistan); (3) An early end to the Iran-Iraq war without Soviet mediation or change in the regional bal- ance of power; (4) Elimination of Iranian human rights abuses; (5) Movement toward the normalization of Iranian-American relations; (6) Resolution of American legal and finan- cial claims in the Hague tribunal; (7) Iranian moderation on OPEC pricing policy. - Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 To begin the process of reaching these goals, Teicher and Fortier recommended that the United States: (1) Encourage Western allies and friends to help Iran meet its import requirements so as to reduce the attractiveness of Soviet assistance and trade offers, while demon- strating the value of correct relations with the West. This includes provision of select- ed military equipment as determined on a case-by-case basis. (Draft NSDD, U. S. Policy Toward [sic] Iran at 1-2, 5-6, in McFarlane to Secretaries of State and Defense, 6/17/85) (2) Cooperate with friendly intelligence serv- ices to improve ability to counter clandestine Soviet activities in Iran; (3) Increase contacts with allies and friends on the Iranian situation and be ready to com- municate through them to Iran; (4) Establish links with, and provide support to, Iranian leaders who might be receptive to efforts to improve relations with the United States; (5) Avoid actions that could alienate Iranian groups that might respond favorably to such ef- forts; (6) Respond to Iranian supported terrorism with military action against terrorist infrastruc- tures; (7) Increase our Voice of America effort to discredit Moscow's Islamic credentials; (8) Develop a ". . . plan" for supporting United States policy in various contingencies; (9) Continue to encourage third party efforts to seek an end to the Iran-Iraq war. (Id.) The Secretary of State responded to the draft NSDD on June 29, 1985. "The strategic impor- tance of Iran and the value of reassessing our policy toward it are clear," he wrote. "The draft NSDD constructively and perceptively ad- dresses a number of the key issues. I disagree, however, with one point in the analysis and one specific recommendation." (Comment on Draft NSDD, Shultz to McFarlane, 7/29/85) In his view, the draft NSDD appears to exaggerate cur- rent anti-regime sentiment and Soviet ad- vantages over us in gaining influence. Most importantly, its proposal that we permit or encourage a flow of Western arms to Iran is contrary to our interest both in contain- ing Khomeinism and in ending the ex- cesses of this regime. We should not alter this aspect of our policy when groups with ties to Iran are holding US hostages in Lebanon. I, therefore, disagree with the suggestion that our efforts to reduce arms flows to Iran should be ended. If the NSDD is revised to reflect this concern, I would like to see the draft again before it is put in final form. (Id.) Secretary Shultz devoted the rest of his com- ments to further analysis of his reasons for op- posing arms shipments to Iran and his dis- agreement with the NSDD's portrayal of Iran's relations with the Soviet Union. "The inherent limits on the Iranian-Soviet relationship are un- derplayed in the NSDD draft. Iranians have a deep historical mistrust of the USSR. The Ira- nian feelers to the Soviets are for arms and for limitations on Soviet arms supplies to Iraq; the Iranians do not seek a closer relationship." Any attempt at a closer relationship with the Soviet Union would encounter resistance. His com- ment further reminded McFarlane that, under the Shah, "Iranian-Soviet relations were closer and more cooperative than they are now." (Id.) The Secretary had no objection to passing a message to the Speaker of the Iranian Majlis (Parliament) Rafsanjani while abroad express- ing the United States interest in "correct" rela- tions, and to encourage allies and friends to broaden their commercial relations with Iran. Such initiatives to diminish Iran's isolation should not undermine pressure to bring an end to the war and restrain arms flows. The com- ment concluded that this two track policy re- mained best. (Id.) The Secretary of Defense submitted his reac- tion to the draft NSDD on July 16, 1985. He told the Board that his initial reaction was to write "absurd" in the margin. "I also added that this is roughly like inviting Qadhafi over for a cozy lunch." (Weinberger 5) While his formal comment noted his agreement with many of the major points in the paper, several of the proposed actions seem questionable. Moreover, it is ex- tremely difficult to consider an explicit re- vision of our policy toward Iran as long as we continue to receive evidence of Iranian Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 complicity in terrorist actions and planning against us. I do not believe, therefore, an NSDD should be issued in the proposed form. (Weinberger to McFarlane, 7/16/85) The Sec- retary of Defense "fully" supported the short- term goal of blocking Soviet expansion into Iran. Under no circumstances, however, should we now ease our restriction on arms sales to Iran. Attempting to cut off arms while remaining neutral on sales to either bellig- erent is one of the few ways we have to protect our longer-range interests in both Iran and Iraq. A policy reversal would be seen as inexplicably inconsistent by those nations whom we have urged to refrain from such sales, and would likely lead to increased arms sales by them and a possi- ble alteration of the strategic balance in favor of Iran while Khomeini is still the controlling influence. It would adversely affect our newly emerging relationship with Iraq. Secretary Weinberger then enumerated those actions-improving intelligence gathering capa- bilities as recommended in the SNIE, establish- ing contacts with "moderates", whom intelli- gence might identify as favoring policies favor- able to U.S. and Western interests; communi- cating our interest in correct relations through allies and friends while remaining neutral in the Iran-Iraq war; pressing the Khomeini gov- ernment in public statements to mitigate its hostile policies, while encouraging opponents of those policies; and the like-he believed best calculated to achieve United States goals in the region. He concluded by reaffirming his sup- port for present policies in face of Iran's "international lawlessness." He emphasized that "[c]hanges in policy and in conduct, there- fore, must be initiated by a new Iranian govern- ment." The United States should encourage change, and support moderation and the devel- opment in the future of amicable relations. He did not think the program outlined in the draft NSDD served these goals. (Id.) In contrast, the Director of Central Intelli- gence wrote McFarlane on July 18, 1985, that I strongly endorse the thrust of the draft NSDD on U. S. Policy Toward Iran, particu- larly its emphasis on. the need to take con- crete and timely steps to enhance U.S. le- verage in order to ensure that the USSR is not the primary beneficiary of change and turmoil in this critical country. While I am broadly in agreement with its assessment of the current political situation, the NSDD needs to reflect more fully on the complex of Soviet motives and recent actions to- wards Iran and their implications for U.S. policy initiatives... . . (Casey to McFarlane, 7/19/85) The Director of Central Intelligence then enumerated what he considered to be substantial weaknesses in the intelligence analysis of the draft NSDD. (Id.) Teicher told the Board that the reactions of the Secretaries of State and Defense brought inter-agency consideration of a new Iranian policy to "a standstill." (Teicher 13) Teicher sought guidance from Fortier, Poindexter, and "perhaps with McFarlane." (Id.) They asked him to see if the process had any other ideas. After discussing the matter with Richard Murphy, Assistant Secretary of State for Near East and South Asian Affairs, he concluded that [i]t was clear there was no give and there really wasn't any more creativity. I went back to Fortier and I said the only question is to do nothing, and hope that the situation doesn't create or lead to the negative dangerous situation that we see as a possibility, or present the President with a decision memorandum which lays out, in very clear terms, the different perspectives of his advisors and asks him to make a de- cision. In the event, I was advised to do nothing and basically to stand down. I did not produce a draft decision memorandum for McFarlane to sent to the President. That was some time in August, about mid- August, 1985. From that point on, until early March of 1986, I had no cognizance whatsoever of the other track that was taking place on Iran. (Id. at 14) - Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 C. Events Keep the NSC's Ideas Alive: January June 1985 Despite the criticisms of the Secretaries of State and Defense, the ideas embodied in the draft NSDD survived in action. This fact per- haps reflected the turbulent environment in which Teicher drafted the NSDD. A series of kidnappings occurred in Lebanon in 1985: on January 8, Jenco; on March 16, Anderson; on March 22, Fontaine and Carton, both French; on March 26, the British journalist Collett; on May 22, the Frenchmen Kaufmann and Seurat; on May 28, Jacobsen; on June 10, Sutherland. In the-same period, meetings involving differ- ent members of the NSC staff took place with Israelis about Iran. The conversations became more systematic as time passed. Contempora- neous discussions among 'persons of various nationalities about Iranian-American relations also occurred. Together with violent events, es- pecially including the hijacking of TWA Flight 847 in mid June 1985, they formed part of the circumstances that seemed to have given life to the policies advocated by Fuller, Teicher, For- tier, McFarlane, and the Director of Central In- telligence. In a series of meetings beginning in January 1985, Yaacov Nimrodi, an arms merchant and former Israeli Defense Attache in Tehran, Ghorbanifar, Amiram Nir, Advisor to Prime Minister Peres on Counterterrorism, and Adolph Schwimmer, a long-time arms merchant and, since September 1984, Special Advisor to Prime Minister Peres, considered Iran and the American hostages. They concluded that a plan to gain the release of the hostages and to "open up a dialogue with Iran" was realistic if they could obtain American support. Roy Fur- mark, a business associate of Adnan Khashoggi and participant in at least one of the meetings, told Charles Allen of the CIA that "profit was certainly a motive but that the group did see their efforts as leading toward stability in the region and the release of the hostages." 5 (DCI 5 Roy Furmark, an associate of the Saudi businessman Adnan Khashoggi, told the Board that he met Ghorbanifar in January 1985, and subsequently introduced him to Khashoggi. He re- called that Ghorbanifar and Khashoggi had a number of conver- sations about Middle Eastern politics. (Furmark 3) Ghorbanifar and Khashoggi had a number of meetings starting in January 1985. Khashoggi reported Ghorbanifar's views on Iranian politics to Poindexter, undated but after October 22, 1986) The Board also obtained rather cryptic evi- dence of a meeting in Cologne in late March involving Iranians, including probably the chief of the Iranian buying office, Dr. Shahabadi, a friend of Adnan Khashoggi. (Unsigned and un- dated note; Furmark 34) Basic thrust of the meeting is that we wanted to open discussions with Iranian officials and we also wanted the hostages freed. Shabadi said that he would discuss this with Khameni'i and [a cleric] and come back out to see us at subsequent meeting this meeting never took place. However, there were two phone conversations with someone in Tehran who according to Zaheri was [a cleric]. In this case there were requests for weapons to show our bona fides. These were turned aside. They then tried to get boeing spare lkarts [parts]. Finally gave us a list of ten items of spare parts for a boeing. cast of characters was Zaheri, Shoja'i, ghorbanifar (no direct contact in his case) and Shahabadi. Zhaheri khad a falling out with Shoja'i over money. Zaheri finally gave up and returned to Houston. We determined that the Iranan side was only interesed in money. (Original spelling and punctuation. Unsigned and undated note) In May, Shackley recalled discussing the hostage problem over lunch with Ledeen. Shackley told him about his report on his November 1984 meeting with Ghorbanifar. Shackley remembered that Ledeen asked for a copy of the report. Ledeen said people in the government were interested in investigating the hostage question, and asked if Shackley could "find out whatever that was as a channel, if it is still open." (Shackley 23) On June 7, 1985, Shackley prepared a second report on "American Hostages in Lebanon." He gave it to Ledeen who passed it to LtCol Oliver North, the NSC staff officer responsible for counterterrorism. (Shackley 34; Ledeen (2) 5-6) Shackley reported that General Hashemi had taken soundings with Iranians on the possi- bility of arranging the freedom of Americans to McFarlane in a long memorandum on July 1. (Id.; Ghorbanifar 37-38) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 kidnapped in Lebanon. On June 1, Ghorbanifar told Hashemi that his Iranian friends had told him the following: -Iranian authorities were flooded with proposals to help obtain the release of American hostages in Lebanon. As a result, they did not know who was who. -Tehran was not interested in the human- itarian ploy that had been put forth by Ghorbanifar.6 -Tehran wanted the following: (1) a dialogue with a responsible American who can identify what he represents; (2) a discussion of a quid pro quo that involves items other money. We told Ghorbanifar that we would pass on this commentary to "friends." ("American Hostages in Lebanon," 6/7/85) D. NSC Staff Activity: May- July 1985 On December 16, 1986, Secretary Shultz tes- tified before the Senate Select Committee on Intelligence (closed session), and subsequently told the Board that, on May 30, Ambassador Lewis in Tel Aviv reported that Ledeen was on a "secret mission for the White House" and to ask if Secretary Shultz knew "what was going on." The answer was no. Ambassador Lewis said he had asked at the Israeli Ministry of Defense about Mr. Ledeen and had been told it was "too hot" to talk about, but that Defense Minister Rabin would tell me about it when he visited Washington. (Shultz, 12/86, 4; SRB, 9) 7 When Secretary Shultz met Defense Minister Rabin on June 1, 6 Perhaps a reference to Ghorbanifar's suggestion that the hos- tages be ransomed for cash in a disguised transaction using him- self as middleman. See supra p. B 3. 4 In his first interview, Ledeen told the Board that he made a second trip to Israel at the end of May to meet with Gazit to find out what the Israelis knew about the Iranian situation. (Ledeen (1) 13, 14-16) In his second interview, Ledeen reported that, al- though he thought he had made two trips to Israel in May, his passport and other records do not corroborate his memory. He concluded that he did . not return to Israel until July 1985. (Ledeen (2) 15) the Defense Minister mentioned neither Ledeen nor Iran. (Id. at 5) The Secretary fur- ther testified that an NSC staff member told a member of his staff that Ledeen had asked McFarlane for permission to follow up on his earlier trip to obtain intelligence about Iran, that McFarlane "was ambivalent, refused to give Mr. Ledeen a letter to Prime Minister Peres, but reportedly agreed to allow Mr. Ledeen to pursue the matter. We were told that Mr. Ledeen went to Israel and received a positive response to this proposition." (Id. at 4-5) On June 6, 1985, Poindexter informed Robert Kimmitt, at that time Executive Secre- tary of the NSC, that McFarlane had decided to cancel Ledeen's trip. This activity concerned the Secretary of State. He told the Senate Select Committee on Intelligence that, on June 5, 1985, while he was in Lisbon, he sent a message to Mr. McFarlane complain- ing about Mr. Ledeen's contact with the Is- raelis, which had bypassed both Ambassa- dor Lewis and myself. I said that Israel's record of dealings with Iran indicates that Israel's agenda is not the same as ours, and an intelligence relationship with Israel concerning Iran might not be one upon which we could fully rely. I felt that "it could seriously skew our own perception and analysis of the Iranian scene. I said in my message to Mr. McFarlane, "I am mys- tified about the way this situation has been handled and am concerned that it contains the seeds of further embarassment and se- rious error unless straightened out quick- y. On June 7, 1985, in Portugal, I received a message from Mr. McFarlane saying that he was "a little disappointed in my pre- judgments", and that he had intended to tell me about the matter but had not had time to do so. He said "I am turning it off entirely . . ." Mr. McFarlane said that it had been an Israeli initiative and that Mr. Ledeen was acting "on his own hook." (Shultz, 12/86, 5-6) Also on June 7, North was working on vari- ous approaches to- achieve the release of those Americans kidnapped in .Lebanon: He, submit- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ted an action memorandum to McFarlane asking approval for two efforts aimed to secure the release of hostages. McFarlane approved both. Under the first, the United States would support efforts to find a private solution to the problem of the American and French hostages in Lebanon and the three Lebanese Da'Wa prisoners in Kuwait whose release the hostage holders demanded. "[T]he . . . operation will likely have produced results or failed by June 16, 1985," North wrote. The second plan in- volved the private ransoming of two hostages, including Buckley, for $2 million.8 This oper- ation would take "considerable time (contacts inside Lebanon, financial transactions, and rental of yacht/safehouse)"; thus, it was possi- ble to undertake it at the same time as the pri- vate efforts were underway. (North to McFar- lane, 6/7/85) To implement this proposal, North asked McFarlane to contact the Attorney General to secure the services of two officers of the Drug Enforcement Agency who would work with the NSC staff on this matter. McFarlane approved and wrote "North to follow up 6/10 w/AG." (Id.) On June 14, 1985, two Lebanese men hi- jacked TWA flight 847, and directed the pilot to land at Beirut airport. There, the hijackers removed thirteen Americans from the plane and killed an American sailor. This episode abm sorbed the government until the surviving hos tages were released on June 29. On June 17, the Director of Central Intelligence heard from his wartime friend, John Shaheen, that a Dr. Cyrus Hashemi, under indictment for attempt- ing to sell arms to Iran, claimed to have dis- cussed with the Iranian Foreign Ministry an ex- change of hostages for the release of the Da'Wa prisoners in Kuwait, TOW missiles, and a nolle prosequi for Hashemi. (Casey to C/NE, 6/17/85) According to the CIA Inspector Gen- eral, Israeli officials asked Ghorbanifar to use his influence in Tehran to obtain the release of hostages. (CIA/IG Chronology 2) On June 19, Iran sent the United States a message to the effect that Tehran wanted to do as much as it could to end the TWA crisis. (Teicher to McFarlane, 6/19/85) The United States re- 8 Documentary evidence suggests that the private source of these funds was H. Ross Perot. On August 6, North'noted that Perot had called with the news that an NBC reporter had asked him to confirm that he had donated $2 million to obtain the re- lease of hostages. ("6 Aug," note in North's handwriting) sponded on June 21 that "[i]t is the view of the United States that the government of Iran cannot escape its responsibilities . . . to help secure the release of the hostages. . . ." (DT 6/21/85 1828L) 9 At the beginning of July, McFarlane and Ledeen had separate, but apparently related, meetings with Schwimmer and Kimche, respec- tively, in Washington. Ledeen told the Board that Kimche called him early in the month to ask him to meet Schwimmer. They met a week later (probably July 11; see note 10 infra). (Ledeen (1) 17) In his two interviews with the Board, Ledeen recalled Schwimmer reporting that he had recently met Ghorbanifar through Schwimmer's friend, Khashoggi. Ghorbanifar's knowledge of Iranian policies impressed the Is- raelis. Ghorbanifar had for the first time given them what they considered to be a really solid picture, in detail, of the internal Ira- nian situation and the Iranian connection to international terrorism. And in addition he had various proposals that he claimed to be representing on behalf of the Iranian government, who were high individuals inside the Iranian government, and they thought it was im- portant that I should come and meet this person. And I said [I] was planning to come to Israel anyway and that I would check with Bud [McFarlane] and if it was okay with Bud I would try to meet with him then. And I talked to Bud and he said fine. (Ledeen (2) 17) Schwimmer, whom Ledeen de- scribed as one of Foreign Minister Peres' "close friends," knew about Ledeen's May con- versation with the then-Prime Minister. (Id. at 19) "[A]s best as I can recall it at this point," Ledeen told the Board, 9 In November 1986, the NSC staff prepared a number of chro- nologies. The two fullest, entitled "U.S./Iranian Contacts and the American Hostages," bear the designations "11/17/86 2000 (Maximum Version)" ("Maximum Version") and "11/20/86 2000 (Historical Chronology)" ("Historical Chronology"). The Maxi- mum Version notes that "U.S. intelligence reports indicate that Majlis Speaker Rafsanjani, who was travelling in the mid-east at the time, and Iranian Foreign Minister Velayati both intervened with the captors [to secure the release]. Rafsanjani, in his speech on November 4, 1986, for the first time publicly acknowledged his role in this matter." Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 I think that what happened was that Schwimmer described Ghorbanifar and he may have talked something about hostages also, that I went to Israel and met Ghor- banifar, where all of this took on real flesh, that Kimche then came back to Washing- ton early in August and told Bud about it, and formulated the proposition, that Bud then discussed it with the President, and by the time I came back in the middle of August the President had approved it and I then communicated that decision to the Is- raelis. And I'm quite sure that is the chronology. General Scowcroft: Do you have any notion how this thing got transformed from a research project into an action pro- gram over a very short period of time and who made the transformation? Mr. Ledeen: It is what I wrote in the Post, General. The Iranians came forward. Ghorbanifar came forward. Ghorbanifar is really the driving force behind this whole thing. I mean, one can speculate about Americans and Israelis, but it is clear that the guy really-I mean, these ideas did not come either from the Government of the United States or the Government of Israel or arms merchants. These ideas came from Ghorbanifar. He was the person who intro- duced them. He was the one who put them forward, and he was the one who claimed to have the capacity to achieve them. So it happened because the Israelis were approached by Ghorbanifar as a way of getting to the United States, and I be- lieve-I mean., one of the few things that I do believe that Khashoggi has said is what he said on that TV show with Barbara Wal- ters, that he suggested to Ghorbanifar that the best way to get the Americans' atten- tion was to go to the Israelis. That is the way he would think, and he was right, in fact, and it worked. So that was the channel from Iran to the United States and that is how it happened, and I was the one who found myself in a room with them, that's all. It was an acci- dent. (Id. at 21-23) Contemporaneously, Kimche also visited Washington. He met McFarlane on July 3. Ac- cording to McFarlane, Kimche sought "the po- sition of our government toward engaging in a political discourse with Iranian officials." (McFarlane (1) 6) Kimche thought the Iranians in question would ultimately need something, namely arms, to show for the discussions. "But," McFarlane told the Board in his first interview, that was not a request [for arms] on July 3rd. He said that the Iranians understood that, because we had never seen them and had no basis for confidence that they were people of influence and authority, under- stood that they needed to demonstrate their own bona fides, and that they be- lieved that they could influence the Hizbal- lah in Lebanon to release the hostages, and in fact went as far as to convey through him on July 3rd that they had three approaches, just in terms of formats, of where they might deliver the seven hos- tages, and sought our comment on which of these was preferable. (Id. at 7-8) McFarlane took this message as an indication that Iranians understood that Irani- an-American relations "couldn't prosper from our point of view for as long as people close to Iran and linked to them continued to hold hos- tages." (Id. at 8) III. The President, His Staff, and the Cabinet: July-August 1985. In his first interview, McFarlane told the Board he then reported this conversation to the President before he entered the hospital for his cancer operation in the second week of July. He informed the Secretaries of State and De- fense and the Director of Central Intelligence in separate conversations. He also said he vis- ited with the President in hospital, and the Sec- retary of State "to discuss it in brief." (Id.) He told the President that Kimche's question was "what is your attitude toward engaging with Iran in a political agenda, period." (Id.) Ac- cording9to McFarlane, the President considered the question in a broad context, including Kimche's suggestion that eventually arms trans- fers would become an issue. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 And while it wasn't linked to the hostages, the President said, well, it seemed to him that the Middle East experience well beyond Iran is that elements to succeed ul- timately to power do need to strengthen themselves, and that the currency of doing that is usually weapons. And he said the key element is not denying history, but de- ciding whether or not our doing that or somebody else doing that can be distin- guished as a political matter of policy be- tween the natural perception of people that weapons are going to people por- trayed as terrorists. Iran is identified as a terrorist state. He said the key element is whether or not these people are indeed de- voted to change and not just simply oppor- tunists, self-serving radicals. (Id. at 9) In his meeting with the Board on February 11, 1987, the President said he had no recollec- tion of a meeting in the hospital in July with McFarlane and that he had no notes that would show such a meeting. (R. Dawson & W.C. McFadden II, Memorandum for the Record, 2/ 9/87) In his third interview with the Board, Febru- ary 21, 1987, at the Bethesda National Naval Hospital, McFarlane recalled: I have felt since last November-and that is where we started-that it has been, I think, misleading, at least, and wrong, at worst, for me to overly gild the President's motives for his decision in this, to portray them as mostly directed toward political outcomes. The President acknowledged those and recognized that those were clearly impor- tant. However, by the tenor of his ques- tioning, which was oriented toward the hostages and timing of the hostages, from his recurrent virtually daily questioning just about welfare and do we have anything new and so forth, it is very clear that his concerns here were for the return of the hostages. Now maybe it's come to your attention that there was a meeting with the TWA 847 rel- atives and hostages on July 4 or 5, and the President stayed with Mrs. Reagan at Ar- lington Cemetery for an extra half hour or so going down and greeting each of the families there, and it was a very moving moment and it had an impact on him. Within a day or so of that I brought to his attention this original proposal from Mr. Kimche, and the President's reaction was quite enthusiastic and somewhat perhaps excessively enthusiastic, given the many uncertainties involved. But it was expres- sive of his attitude on this issue from the beginning, and from the four, five, or six meetings we had in the next thirty days on it there weren't any inhibitions as persist- ently as well as the Secretary of State and Defense made them, and they were very well made. But the President had no hesitancy about it at all, nor did he when he called me about it last week here in the hospital. Well, the recollection of my having briefed the President on Kimche's visit in the White House and his coming here and his reactions when here at the hospital, I briefed him on the new information re- ceived from Mr. Schwimmer, there is a viv- idness in my recollection that is document- ed datewise by the calendars that I have that the meetings were held in the image of being across the hall with Mr. Regan and the President, filling them in on this, and the President saying words to the effect that gee, that sounds pretty good. The weapons issue is a problem, and our discussion of that, and he says: I guess we can't do the weapons or something like that ourselves, but isn't there a way that we can get at trying to keep this channel going or something like that. Mr. Dawson: And that's tied in to the hos- tages at that point? It is clear that one of the purposes of this is not so much a stra- tegic opening as you might have otherwise stated, but it is an attempt to get arms for hostages through the transfer from Israel to Iran? Mr. McFarlane: Well, I think that was fore- most in the President's mind. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Mr. Dawson: So if he didn't state to you in so many words, Bud, go ahead and do it, he clearly led you to believe from the outset that here was a chance to bring some hostages out through a third coun- try? Mr. McFarlane: It was unambiguously clear. (McFarlane (3) 11-14) On November 21, 1986, McFarlane wrote Poindexter that the President "was all for let- ting the Israelis do anything they wanted at the very first briefing in the hospital." (McFarlane PROF note to Poindexter, 11/21/86, 21:01) Donald T. Regan, the President's Chief of Staff, recalled first learning of McFarlane's con- versation with an Israeli about Iran while the President was in hospital, some two days after his operation. According to Regan, McFarlane wanted authority to enter discussions with the Iranians identified by the Israelis as having "reasonably good connections within Iran but who were on the outside." (Regan 4) Regan told the Board: About the second day after the operation, I believe it was, we went out there-I can find the exact date if you don't have it- met with the President-he was in bed- and McFarlane told him that we had had a contact from Iranians whom he had reason to believe had reasonably good connec- tions within Iran but who were on the out- side, and this had come primarily as a result of Israeli connection with the Irani- ans. At that time I didn't know their names. I now know them to be Ghorbanifar, Kimche, and the like, but at that time I didn't know the names. And what McFarlane wanted was the Presi- dent's authority to make this contact, to see if it could be developed and what it could lead to. There was a discussion of the importance of Iran as far as its strate- gic location . . . and the fact that it seemed worthwhile to McFarlane that this be pursued. The President, after asking quite a few questions-and I would say the discussion lasted for perhaps 20, 25 minutes-assent- ed and said yes, go ahead. Open it up. (Regan 4-5) According to McFarlane, after this meeting, he then conveyed to Kimche the President's openness to a dialogue with Iran. (McFarlane (1) 9) The Secretary of State testified before the House Foreign Affairs Committee that he first heard of this matter while flying between Perth and Canberra, Australia, on July 14, 1985. McFarlane reported that Kimche had met him secretly the week before, and had asked him to confirm that the U.S. was in fact uninterested in pursuing the co- operation earlier proposed. to Mr. Ledeen. Mr. McFarlane wrote that he had so con- firmed. He then stated that an unnamed emissary had "today" reopened the issue on behalf of the Prime Minister.1 ? The em- issary said that in a recent meeting be- tween Israelis and some Iranians, including Mr. Kimche, a Mr. Al Schwimmer, and Mr. Ghorbanifar, the Iranians had painted a pessimistic view of Iran. They allegedly said "their hope and that of what they por- trayed as a significant cadre of the hierar- chy was to develop a dialogue with the West," and emphatically with the United States. The Israelis had allegedly pressed "for some tangible show" of the Iranians' io This "emissary" apparently was Schwimmer. A note from McFarlane's secretary, dated July 11, 1985, contained the follow- ing: JMP [Poindexter] talked with Michael Ledeen this morning about an urgent message from Peres for McFarlane which Al Schwimmer, a Jewish-American who provides lots of money to Peres, wants to deliver to RCM [McFarlane]. McFarlane's secretary reported that Ledeen had lunch with Schwimmer on July 11 and left the following message for McFar- lane: "It is indeed a message from Prime Minister of Israel; it is a follow-on to the private conversation he had last week when David Kimche was here. It is extremely urgent and extremely sensitive and it regards the matter he told David he was going to raise with the President. The situation has funda- mentally changed for the better and that I must explain to him because it will affect his decision. It is very important. It won't keep more than a day or two but could keep until Sat- urday morning. This is the real thing and it is just wonderful news." McFarlane indicated on this note that he would see Ledeen Saturday, July 13. McFarlane's desk calendar confirms this meet- ing. McFarlane told the Board he supposed the "emissary" was Schwimmer, that he did not meet him, and that he probably re- ceived Schwimmer's message from Ledeen. (McFarlane (2) 4) On July 13, the President underwent his cancer operation. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 ability to deliver, and were purportedly told "that they could in the short term achieve the release of the seven Americans held in Lebanon." But, Mr. McFarlane re- peated, in exchange the Iranians had said they would need to show "some gain" and sought specifically the delivery from Israel of 100 TOW missiles. "But they stated," Mr. McFarlane continued, "that the larger purpose would be the opening of the pri- vate dialogue with a high level American official and a sustained discussion of U.S.- Iranian relations." Mr. McFarlane reviewed the "imponder- able questions" raised by this proposal, in- cluding "our terrorism policy against nego- tiating with terrorists (notwithstanding the thin veil provided by Israel as the cut out on this specific matter)." He noted that our long term interest was in maintaining the possibility of renewed ties, and the im- portance of doing something soon about the seven hostages. He said: "We could make a tentative show of interest without commitment and see what happened or we could walk away. On balance I tend to favor going ahead." He said the emissary was leaving soon, asked for a prompt signal, and that he would "await and abide fully by your decisions." I replied by a message to Mr. McFarlane that same day that "I agree with you that we should make a tentative show of inter- est without commitment. I do not think we could justify turning our backs on the prospect of gaining the release of the other seven hostages and perhaps developing an ability to renew ties with Iran under a more sensible regime-especially when presented to us through the Prime Minister of Israel." This position-indicating a willingness to talk but no commitment to pay-was con- sistent with Administration policy of main- taining contact with people who might eventually provide information or help in freeing hostages. I pointed out, however, "the fraud that seems to accompany so many deals involving arms and Iran, and the complications arising from our 'bless- ing' an Israel-Iran relationship where Isra- el's interest and ours are not necessarily; the same." I suggested that Mr. McFarlane should give the emissary "a positive but passive reply." That is, tell him that the U.S. "is receptive to the idea of a private dialogue involving a sustained discussion of U.S.-Iranian relations. In other words, we are willing to listen and seriously con- sider any statement on this topic that they might wish to intitiate." I said I thought Mr. McFarlane should manage this probe personally, but that the two of us should discuss its sensitivity and the likelihood of disclosure after my return. I told him to tell the emissary "that you and I are in close contact and full agreement every step of the way; this is all the more important in view of the present lack of unity and full coordination on the Israeli side." (Shultz, 12/86, 8-10; SRB, 17-20) On July 16, the Secretary saw an intelligence report, which indicated that Ghorbanifar, whose name McFar- lane had mentioned, was " `a talented fabrica- tor.' " (Shultz, SRB, 20) In the middle of July, Ledeen went to Israel on vacation and, toward the end of the month, attended a meeting with Ghorbanifar, Kimche, Schwimmer, and Nimrodi. "[T]o the best of my recollection," Ledeen said, this conversation, is the first time that the subject of weapons and hostages was raised. They were raised in the context of the future relationship between the United States and Iran. They were not raised separately as a deal or an entity unto themselves because what Ghor- banifar had to say, in addition to this fairly enlightening picture of Iran that he pre- sented us with, was. that there were signifi- cant and powerful people within the gov- ernment of Iran who were interested in im- proving relations with the United States. . . . [A]s part of the evolution of this relationship in a more positive direc- tion Iran would undertake to make ges- tures of good faith and to demonstrate not only their willingness but their capacity to alter their policies in a direction which we would consider positive, and that at the same time they would like to see on the part of the United States a similar demon- stration of willingness and capacity and that the only such gesture by the United Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 States that would convince them simulta- neously that the President was personally involved and committed to this policy and that the United States would act and exert its power in the world to do such things would be if the United States enabled Iran to obtain weapons which were at present unobtainable because of the American arms embargo, and that the sorts of ges- tures that the Iranian government would make to demonstrate its good faith and ca- pacity included weighing in to try to obtain the release of hostages in Lebanon, but also other things, including statements by leaders of the government which we would see clearly were moving in that direction. (Ledeen (1) 22-23) After the meeting, Ledeen, Kimche, Schwimmer, and Nimrodi decided that someone should report the conversation to McFarlane, which Kimche offered to do. (Id. at 24) At the end of July, Furmark and Ghorbanifar met Yaacov Nimrodi, an arms merchant and former Israeli Defense Attache in Tehran, Amiram Nir, Advisor to Prime Minister Peres on counterterrorism, and Adolph Schwimmer, a long-time arms merchant and, since Septem- ber 1984, Special Advisor to Prime Minister Peres, at one of Nimrodi's homes in Tel Aviv. (Furmark 40; Charles Allen reported that Fur- mark said Nir attended this meeting. C. Allen to DCI/DDCI, 10/17/86) Furmark, who was not within earshot of the conversation, possibly because the Israelis were concerned that Fur- mark might be a CIA agent, (Furmark at 41), provided only a sketchy account to the Board. He said that they discussed a program "to begin to open up relations between the U.S. and Iran." (Id. at 37) He heard no mention of hostages or arms, but did overhear a reference to "spare parts." (Id.) But he said, the U.S. had agreed, the Israelis had agreed, the Iranians had agreed to do some business, but nobody would trust each other. The Iranians would not pay for anything until they received and inspected the goods, because, I've heard on previous transactions involving even foodstuffs and stuff they would pay in advance and they opened up the crates and there were rocks in it. So they became very shell-shocked about paying in advance for anything. And of course the Israelis would not send anything until they were paid in advance. So now you had a stalemate. Khashoggi then said, well, I will trust the Iranians, I'll trust the Israelis, I'll trust the Americans, I'll put the money up. So the first transaction I understand was a million dollar transaction which he deposit- ed into a numbered account which the Is- raelis told him to put the money in. The fi- nancing operates like this: He puts a mil- lion dollars into an account, and then Ghorbanifar gives him what we will call a post-dated check for a million dollars in his account at Credit Suisse. And then after the shipment is made, the Iranians inspect the goods, and they then pay Ghorbanifar's account at Credit Suisse. Ghorbanifar tells Khashoggi the check is good, deposit it. And that is how the financing was done all throughout. (Id. at 5-6) Furmark apparently told much the same story to Charles Allen, the CIA's National Intelli- gence Officer for Counterterrorism, and George Cave, a CIA annuitant and expert on Iran, who met with Furmark on October 16, 1986. Based on Furmark's account, Allen con- cluded that [t]he idea of providing Iran with military equipment in exchange for American hos- tages-seen as a way of commencing a dia- logue with Iran-also originated in the summer of 1985 and he along with Gho- banifar [sic], traveled to Tel Aviv in August 1985. . . . Subsequently, arms were deliv- ered to Tehran in September 1985, a devel- opment that resulted in the release of Rev- erend Benjamin Weir. (C. Allen to DCI/DDCI, 10/17/86) Kimche called McFarlane July 30 and saw him August 2. According to McFarlane, Kimche said that Rafsanjani, Musavi, the Prime Minis- ter, and Khamenei, the President, had been preoccupied by domestic affairs for about a month, and, therefore, had not pursued the hostage or American issues during that period. Rafsanjani in particular had been dealing with "factional vulnerability." (McFarlane (1) 10) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Now, Kimche said, they found it more difficult. than they had thought to influence their friends in Lebanon. The Iranians were "more con- cerned about the bona fides of our side and specifically about whether or not we would pro- vide weapons right away, not for a threat, not for expanding the war, but, as it was cast, for the expansion of and consolidation of the fac- tion with military elements, of army elements specifically." (Id.) McFarlane informed Kimche that he did not think it "wise or likely" that the United States would transfer weapons to the Iranians, "because we had not dealt with these people.... [T]he notion of our giving weapons to people we did not know, with the track record before us, was imprudent and I thought politically silly." (Id. at 10-11) When Kimche asked what the United States reaction would be if Israel shipped weapons to Iran, McFarlane replied by asking why Israel would. [I]n a nutshell, [Kimche] said: Well, we in Israel have our own interests. They are ba- sically to ensure a stalemate of the conflict with Iraq, but also to get the United States back into Iran, and that helps us if the United States' position in the Middle East is strengthened; and separately, to reduce the Iranian support for terrorism, if that is feasible, is very much in our interest, and so we might very well do this as a matter of Israeli interest. But he said: I pose it for us doing that, be- cause ultimately if we provide things we're going to have to come and buy other ones, and I need to know, are we going to be able to do that or not, whether it's Hawks or TOWs or whatever else. And I said: Well, that really isn't the issue. Israel has bought weapons from the United States for years and always will, and so you don't need to ask whether you can buy more weapons. It is a matter of whether or not the support of the idea of providing weapons to anybody in Iran is in policy terms sensible. But I will get you our posi- tion. (Id. at 11) A. The Principals' Various Views: August 1985 In his meeting with the Board on January 26, 1987, the President said that sometime in August he approved the shipment of arms by Israel to Iran. He was uncertain as to the pre- cise date. The President also said that he ap- proved replenishment of any arms transferred by Israel to Iran. McFarlane's testimony of Jan- uary 16, 1986, before the Senate Foreign Rela- tions Committee, on which the President heavi- ly relied, takes the same position. This portion of McFarlane's testimony was specifically high- lighted on the .copy of the testimony given by the President to the Board. In his meeting with the Board on February 11, the President said that he and Regan had gone over the matter repeatedly and that Regan had a firm recollection that the Presi- dent had not authorized the August shipment in advance. In response to a question from the Board, the President said he did not authorize the August shipment. He noted that very possi- bly, the transfer was brought to him as already completed. He said that subsequently there were arms shipments he authorized that may have had to do with replenishment, and that these could have taken place in September. A memorandum from Peter Wallison, White House Counsel, on which the President heavily relied, stated that the President had been "sur- prised" that the Israelis had shipped arms to Iran in September, and that this fact caused the President to conclude that he had not approved the transfer in advance. On February 20, 1987, the President wrote Chairman Tower: In trying to recall events that happened eighteen months ago I'm afraid that I let myself be influenced by. others' recollec- tions, not my own. I have no personal notes or records to help my recollection on this matter. The only honest answer is to state that try as I might, I cannot recall anything whatsoever about whether I approved an Israeli sale in advance or whether I approved replenish- ment of Israeli stocks around August of Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 1985. My answer therefore and the simple truth is, "I don't remember-period." In his first interview, McFarlane told the Board he reported to the President within two or three days of meeting Kimche on August 2. On McFarlane's recommendation, he told the Board, an informal National Security Planning Group ("NSPG") meeting occurred while the President was convalescing. The Secretaries of State and Defense, the Director of Central In- telligence, Admiral Poindexter, Regan, McFar- lane, and possibly the Vice President attended. Neither the Vice President, nor McFarlane was certain about his attendance. (W.C. McFadden II, Memorandum for the Record, 12/29/86; McFarlane (1) 17) McFarlane remembered this meeting because the President was wearing pa- jamas. McFarlane recalled a very active argument, really, for a good reason, about the wisdom of doing this and very sharp disagreements on the part of the Secretary of Defense, really, and to a lesser extent but emphatically by the Secre- tary of State, but for different rea- sons. . . . [T]he President had available to him very vivid, forceful, thorough expres- sion of views of his Cabinet officers in- volved on this. And it was argued in policy terms, both the issue of a dialogue with Iran, the legitimacy of these people, the legal authorities for-this was not the United States doing something; it was Israel doing something, but nonetheless for involvement of U.S. weapons with U.S. endorsement, which is an important policy. The legal ramifications, the political risks, the matter of Congressional oversight, and then basically the probabilities of, given all these factors, of this having any promise at all. [A]t the end of it the President said, well, as he had before, that his inclination was not to have any U.S.-owned weapons or our inventory involved in this, but that he believed that it was possible over time, if these people's standing and authority and intentions were reformist, if you will, that he could see the need to support them, and with weapons, although at the time he said, right now I'm inclined not to have any U.S. weapons involved, U.S.-owned, but if Israel, whose judgment on this is based on a track record of dealing with these people, believes that it is sensible to do it and does transfer weapons, then ulti- mately their wish to buy replacements we should honor and we should sell to them. (McFarlane (1) 12-13) Regarding hostages, McFarlane told the Board he tried faithfully to summarize Kimche's message: that while the Iranians had told him to say that they understood they needed to dem- onstrate their bona fides and they thought the hostage release was the best evidence of that, and while the arms, the matter of arms, was ostensibly associated with the Iranians' perception of vulnerability, that you would be foolish not to recognize that, first of all, that may be just an artifice, de- liberately to engage in a hostage for arms deal; and even if it isn't, if they are dealing in good faith, the perceptions of people of good will will be that that is the de facto condition. The President understood that and he said: Well, you're right, the risks of misun- derstanding are quite high, and the ques- tion is are these people valid interlocutor- ies or not, dealing in good faith or not. And he says: We have no way of judging it, really, except the track record of the past seven years, and it is only this report, really, and other things, the corroborating work we have done, focused upon intelli- gence hard copy that had been provided by these Iranians to the Israelis and Israel and ultimately to us-that it was basically-an order of battle is the wrong word. It was the names of the leadership of the Iranian armed forces from about the battalion level up, and that is nothing novel, but identify- ing those who were disposed to support these elements and those who were not. Separately, the complexion of the govern- ment in both the Prime Minister's office and the Foreign Minister's office; the Majlis, again identifying those were-well, they were identified in one, one [sic], two, or three lines or factions, basically extrem- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 ists from left to right and where people stood on the political map. l i Well, all these things were considered by the President and, in a word, his decision was no U.S.-owned arms or U.S. transfers; if Israel chooses to do this and ultimately they seek replacements from us they can buy them from us; and yes, finally, we are interested in a political meeting with Irani- ans. Well, I conveyed this to Mr. Kimche, and I was very precise in saying: The purpose here is a political agenda; the vulnerability and risk is a perception of something far different, which is arms for hostages. (Id. at 14-16) On January 16, 1987, McFarlane gave the Senate Foreign Relations Committee a some- what different account from the one he had provided to the Board in his first interview. He said: As I say, it began in July with the President convening each of the people on the Council, hearing their advice, not deciding, but thinking about it. Those same individ- uals meeting singly or in groups with him-again, the Secretary of State and De- fense-and over time in the course of about a ten-day period, late July, early August, the President coming to a conclu- sion to authorize a specific authority for another country to do something.... The President viewed the decision as a decision to grant his approval for the actions of an- other government, although indeed ulti- mately that government would come to us again, Israel, to buy replacement arms. Now, he communicated that to me, and when he did by telephone, I said to him, Mr. President, as you know, your Secretar- ies of State and Defense are opposed to this. He says, yes, I understand that, and provided his own explanation of the basis for his decision. t t This reference to political "lines" in Iran and to information from Iranians listing members of the "lines" with their political preferences is consistent with a document, dated February 5, 1985, prepared by, or with the assistance of, Ghorbanifar, (Ghor- banifar 52), which Khashoggi sent McFarlane on July 1, 1985. Then I notified the other National Security Council members, the Secretary of State and Defense and the others, and on those occasions heard once more the opposition of it from the Secretaries of State and De- fense. And I encouraged them to be back in touch with the President, because you're quite right-the communications through channels that are not always open can lead to ambiguities and misunderstanding. And I know in at least one case, I believe the Secretary of State-perhaps more than once-after the decision, promptly though-reaffirmed his concerns about it, even though out of this country. (McFarlane, 1/16/87, 18-19) The President's official schedule notes an August 6 meeting at- tended by the Vice President, the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, the President's Chief of Staff, and McFar- lane. (Ellen M. Jones, Presidential Diarist, to Jay B. Stephens, 1/24/87) McFarlane told the Board on February 19, 1987: [U]pon returning from the hospital, if you want to proceed in that direction, [the President] did convene his advisors, the members of the NSC, and discuss this matter. As to when concretely he made his deci- sion, I have to say, Mr. Chairman, I don't know and there is no written record of it. The basis on which I say that it had to have happened in the final week of July or the first week of August is, first of all, my own memory of the sequence of events and what we talked about in that period. And there are, and I think my schedule has been given to you, six meetings where he met with his NSC people, all or more than one, between July 22 and August 7, I be- lieve. Now on at least two occasions he discussed this matter with more than me, with at least, on one occasion, with the Secretary of State and the Secretary of Defense, the DCI, the Vice President and Don Regan. General Scowcroft: All together at once? Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Mr. McFarlane: Yes. But my recollection is that there was disagreement on the matter and he did not make a decision at that meeting, and that only after a matter of days, but within two or three, did he call me directly and state that he had consid- ered it and he wanted to go ahead and specifically that if Israel decided that it wanted to sell weapons to Iran that Israel could buy replacements from the United States. Now I have to stress that I don't know, perhaps it has been minimized in the cov- erage of this so far, but at the meeting it is fair to say that though there was opposi- tion by the Secretary of State and Defense that even those who favored it stressed the matter that what was being approved was something to be done by someone else- Israel-and not the United States. And it was seen to be an authorization, a license if you will, for Israel to undertake a plan and that authority given to me on the telephone, and I shared in my recollection with the Secretary of State also by phone, and he expressed his opposition. And I en- couraged him to be back in touch with the President on it, and I believe he was. (McFarlane (2) 9-11) McFarlane noted that "generally speaking the President would reach decisions only at the time of a meeting only if there was unanimity. Where there was disagreement it was his habit almost never to make the decision there but to wait and then convey it to me later on." (Id at 16) Regan remembered that the meeting was in- formal, without an agenda or briefing papers. It occurred in late July or early August, after the President returned from the hospital. Bud [McFarlane] briefed at this and talked about the Israeli connection here and how the Israelis were dealing with the Iranians in an effort to secure the release of many Iranian Jews who were trapped in that country, and they were trying to get them out into Israel, and that the Israelis may have some type of arms sales going with the Iranians. No specific mention that we would be asked to do that, although it was suggested at that time that we might have a chance of getting our hostages out through the Irani- ans. But the Iranians were sure to demand something in exchange for that, and it might be arms. I recall at that time the President express- ing concern over this one-for-one type of swap and not wanting to get into arms sales through people that he at this point did not have enough assurance from Bud that they were (a) reliable or (b) could de- liver on anything, and that we should go slow on this but develop the contact. (Regan 7-8) The Secretary of Defense recalled a meeting at the President's residence after he returned from the hospital. I argued very forcefully against the whole idea, saying that I didn't think it could work. I thought there were all kinds of risks, that the transfer of arms was obvi- ously something we shouldn't even think about doing because we were urging every other country, and I had been urging [other countries] where we had found some transfers going, that this just shouldn't be done, that this would under- cut everything we were going to do in the Mid East and everything else. George Shultz made many of the same points. My clear impression was that the idea was set aside, or finished, that that was the end of it. The President seemed to agree. (Weinberger 6) The Secretary of Defense said Israeli arms transfers to Iran were not dis- cussed. "It was all should we sell arms to Iran?" He recalled no discussion about resup- plying Israel if it shipped arms to Iran, but noted that "McFarlane could have mentioned that the Israelis did this." (Id. at 7) The Secretary of State testified on December 16, 1986, and subsequently told the Board that: On August 6, 1985 during one of my regu- lar meetings with the President, at which Mr. McFarlane was also present, Mr. McFarlane said that he had again met with Mr. Kimche who reported that the Iranians and Israelis had held three meetings, during which the Iranians said Iran was in Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 a shambles and a new government was in- evitable. The military and the people, the Iranians reportedly said, were "still pro- American," and "want a dialogue with America." They also wanted arms from us, and wanted 100 TOW missiles from Israel. All would be totally deniable. The Iranians said they could produce four or more hos- tages and wanted a meeting somewhere. I stated my negative opinion fully. I do not recall the President having decided at that meeting to approve the Iranian offer. I noted then that Mr. McFarlane was pursu- ing the matter. I assumed this was on the basis we had discussed, with no commit- ments. Mr. McFarlane said that Foreign Minister Shamir had told Mr. Kimche that he wanted to know explicitly whether I was informed. At this point I felt that I was fully informed. As far as arms sales were concerned, I said in the meeting that it's a mistake. I said it had to be stopped. (Shultz, 12/86, 11; SRB, 21-24) B. Post-Mortem According to the NSC's Historical Chronolo- gy and the CIA Inspector General, Kimche called McFarlane on August 22 to ask about United States policy with regard to arms ship- ments to Iran. McFarlane elevated the question to the President (and to the Secretaries of State and Defense, and the Director of Central Intelligence). The President stated that, while he could envision providing materiel support to moderate elements in Iran if all the West- ern hostages were freed, he could not ap- prove any transfer of military materiel at that time-period. This position was con- veyed to the Israeli diplomat.12 (Id. at 43- 45) 12 In the course of a long description of the origins of the No- vember 1986 chronologies, McFarlane said that motives for them changed during the process. He said that, at the beginning (No- vember 3, 1986), Poindexter's actions reflected his concern for the hostages and hope that others than Jacobsen would be re- leased. (McFarlane (3) 42) Later, around November 18 when McFarlane was asked to lend a hand, the drafting group's principal objective, probably the primary objective, was to describe a sequence of events that would distance the Presi- dent from the initial approval of the Iran arms sale, distance him from it to blur his association with it. Regan told the Board that he called no dis- cussion of the issue from August 6 until after Labor Day, 1985. I don't recall anything further about this until after the President returned from the ranch, which would have been after Labor The November 18 chronology, which I indeed helped pre- pare, was not a full and completely accurate account of those events, but rather this effort to blur and leave ambiguous the President's role. The language was intended, I would say, to convey the impression that the United States had not ex- pressly authorized the sale either [of] arms directly from the United States or by the Israelis on behalf of the United States, but, second, to preserve the ability to say that if Israel were to make such sales that they could expect to purchase replacement items from the United States. And I think that is an accurate reflection of how that is cast. Now it was done as a briefing memo to be used by people who would brief the President prior to the next day's press conference, and in my judgement expected to go through a number of iterations before it reached that point. But that is my opinion of the climate in which that session occurred and the intent of its outcome. General Scowcroft: To put it baldly, could one say that the intent of this was in a sense to put the burden on the Israe- lis? We didn't approve it, they went off and did it-to soften that by the comment about replenishment? In other words, if you're going to say that the President didn't authorize it, only two things can happen-that you told the Israelis to do it on their own, or that the Israelis did it on their own. Mr. McFarlane: Well, I think your portrayal of it as you origi- nally cast it is an accurate description. It was an intent to give the impression that Israel had taken the action. Mr. Dawson: Why did Poindexter, though, at that point focus in on trying to distance the President from the prior approv- al in advance of the Israeli shipments? Why was that, even at that juncture, so important an issue? Mr. McFarlane: Well, bear in mind I think this is an impor- tant part of it, that before this ever occurred he had already himself on the record acknowledged that the President did approve in advance, and that is in the White House tran- scripts. Don Regan did, too. Mr. Dawson: You're referring there to the backgrounders that Poindexter and Regan have in advance of the November 18-- Mr. McFarlane: I believe that's right. Mr. Dawson: And would you also add to that that the Presi- dent had already denied prior approval? I mean, was that also something else which you would put into the context of that? Mr. McFarlane: Well, it is difficult to harmonize those posi- tions. That is clear. But the President's position, which I think did misrepresent things-I'm not sure timing-wise which statement you are talking about. Mr. Dawson: Well, you had said earlier-- Mr. McFarlane: Yes, and those remarks were cast at a time when they were still relying or mostly on the hope that there were still hostages that were going to come out. Mr. Dawson: This is right after the public disclosure? Mr. McFarlane: Yes. (Historical Chronology 5. Cf. CIA/IG Chronology 3) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Day in '85. He had a long vacation then because they wanted him to take more time to rest from the operation. At that time-again this was at a normal 9:30 meeting, not at a special meeting- McFarlane informed the President that indeed the Israelis had sold arms to the Iranians and that they hoped to get some of our hostages as well as some Jews from Iran out as a result of this. This would have been early September. Now I recall at that meeting the President being upset at the fact that arms had been sold by the Israelis, American arms-and "upset" I think is the proper word; it wasn't real anger, but it was sort of, you know, well, why did they do that; how come we didn't know? That type of thing- and McFarlane explaining that the Israelis simply had taken it upon themselves to do this. But the President at that time did not indi- cate that he wanted to make a big deal out of it. It was done. It had been done. There was a possibility of a hostage coming out. He decided to leave it alone, just accept the fact that it was done, leave it there. I don't recall anything else happening, except I believe that Benjamin Weir did come out at that time, if I'm not mistaken, or shortly thereafter. (Regan 8-9) Secretary Shultz testified to the same effect on December 16, 1986, as did Secretary Wein- berger. (Shultz, 12/86, 11; Weinberger 7) Ledeen told the Board that, when he returned to Washington in the middle of August and re- ported to McFarlane on his meetings in Israel, McFarlane said "that the President had decided to go ahead with the test of the sort that Kimche had described-which is that we would authorize the Israelis to ship a quantity of weapons to Iran and we would see whether the Iranians followed through on their demonstra- tions of good faith and capacities and so forth." (Ledeen (1)27) According to informa- tion provided by the White House Counsel, the President spoke to McFarlane by telephone on August 23. Ledeen recalled that "all Bud said to me was the President has said that it's okay to tell them that. It's a go. And there wasn't any more detail than that." (Id. at 31) Accord- ing to Ledeen, this statement meant that Israel had American approval to ship TOWs to Iran. (Id. at 32) Ledeen assumed it meant that the United States would resupply the Israelis for the TOWs.13 In any event, he conveyed this message to Kimche as his presumption. (Id. at 31) At the same time, Ledeen thought Secretary Shultz' displeasure with his trips "sounded like a simple standard turf irritation rather than any- thing substantive. It didn't seem to have any- thing to do with policy. There was no policy anyway." (Id. at 29) On January 16, 1987, McFarlane recalled that the President's approval came in August of 1985. The authority was that if Israel were to sell arms to Iran and ultimately came to the United States to replace them, that they could do that, so long as the quantity shipped and the character of the weapons wouldn't alter the complex of the situation in the war or contribute to terrorism. (McFarlane, 1/16/87, 13) In his third interview with the Board, McFar- lane said: I recall the President calling me and I while I couldn't give you verbatim quotes or near it, his point, his opening point was about that matter we discussed the other day, the hostages. Well, the matter was a very big matter and in terms of purposes and so forth, but it was expressive of the kind of motives that I think that lend some urgency to his call. He called and said: I think we ought to get on with that. Let's go ahead with that. And that, frankly, was more the way the Presi- dent dealt with an issue, as opposed to 13 According to the "Maximum Version," [o]n August 22, 1985, the U.S., through the U.S. citizen in- termediary [Ledeen, whom the Maximum Version identified by name and described as "a private American citizen"], ac- quiesced in an Israeli delivery of military supplies (508 TOWs) to Tehran. We were subsequently informed that the delivery had taken place at the end of August, though we were not aware of the shipment at the time it was made. U.S. acquiescence in this Israeli operation was based on a deci- sion at the highest level to exploit existing Israeli channels with Tehran in an effort to establish an American strategic dialogue with the Iranian government. (Maximum Version at 4) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 saying: well, I like Option 1, 2, 3 or 4. But I did then spell it out, and I said: Mr. President, what's involved here is the sale by Israel of weapons and ultimately them coming to us to buy replacements. And he says: Yes, I understand that. And I said: Do you understand, of course, now that George and Cap are very much opposed to this and they have very good reasons? And he said: Yes, I do, but I draw a differ- ence between our dealing with people that are not terrorists and shipping arms to ter- rorists. And I'm willing to defend that. And he even said something like: I will be glad to take all the heat for that. But the point about the opposition from the Cabinet officers was made once more, and he said: Yes, I understand how they feel, but I want to go ahead with this. (McFarlane (3) 17-18) IV. The NSC Staff, Arms, Hostages, and Finances Whatever the President may or may not have decided on August 6, or subsequently, mem- bers of the NSC staff began in August 1985 to become involved in missions having to do with the shipment by Israel and the United States of advanced weapons to Iran and the release of American citizens kidnapped in Lebanon. A. The First Shipment of TOW Missiles: August- September 1985 While Ledeen's account is not altogether sat- isfactory on the point, and McFarlane did not mention the episode to the Board, when Ledeen reported on his August meetings in Israel, McFarlane apparently decided to estab- lish secure telephone communication with Kimche. Ledeen flew to London on August 20, carrying an elementary code for Kimche, which he delivered the next day. (Ledeen (1) 28) Kimche gave Ledeen documents for McFarlane obtained from Ghorbanifar. At this or another meeting, Kimche explained that "in his experi- ence with Iranians there was no way that Iran would deliver everything that it had promised; that whatever happened. would be less ?than what they were promising, but that he thought.. that even something significantly less than what they had promised would still be significant and that he was basically positive about giving it a try." (Id. at 37) In late August or early September, North, to whose office Ledeen was attached, (id at 44), was directed to prepare "contingency plans for extracting hostages-hostage or hostages- from Lebanon." (Id. at 46) 14 On August 29 and 30, the NSC staff arranged for the State Department to issue a passport in the name of "William P. Goode" for North to use on "a sensitive operation to Europe in connection with our hostages in Lebanon." (North to McFarlane, 8/30/85; Martin to Platt, n.d.; McFarlane PROF note to Martin, 8/30/85, 17:40:38; Shultz, 12/86, 12) In addition, on August 31, 1985, Poindexter established a pri- vate method of interoffice computer communi- cation with North, preventing normal screening by the Executive Secretary of the NSC. (Poin- dexter PROF note, "PRIVATE BLANK CHECK", to North, 8/31/85, 13:26:58) North asked Charles Allen, National Intelligence Offi- cer for Counterterrorism, on September 12 to increase intelligence efforts against Iran and Lebanon, and informed him that Buckley might be released in the next few hours or days. (C. Allen 4-5; CIA/IG Chronology 3) When the first information was received on September 13, Allen asked for White House guidance on how th[is intelli- gence] should be disseminated. North, after consulting with National Security Ad- visor McFarlane, direct[ed] that dissemina- tion be limited to Secretary Weinberger, the D[irector of] C[entral] I[ntelligence] (or Deputy Director McMahon), McFar- lane, and himself. North [said] that McFar- lane had directed that no copy be sent to the Secretary of State; and that he, McFar- lane, would keep Secretary Shultz advised orally on the NSC project. (CIA/IG Chronology at 4; C. Allen 6) 15 14 Ledeen told the Board that he thought this episode marked the first time North heard about the program. (Ledeen (1) 46; Ledeen (2) 74) 15 The original distribution list provided included Vice Admiral Moreau of the JCS staff, not Secretary Weinberger. When the Secretary saw an intelligence report pertaining to this program in the fall of 1985,'he insisted that he receive all such documents. His military assistant, General Powell, reported that "the. White Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 On August 30, 1985, Israel shipped 100 TOW missiles to Iran; on September 14, Israel shipped an additional 408 missiles. There is some evidence that this shipment was returned to Israel, in whole or in part, because it con- tained defective or otherwise unacceptable mis- siles, and that Israel replaced and reshipped the weapons. (Furmark 6-7) Ghorbanifar told the Board that he accompanied the shipment of 100 TOWs to Iran and that in exchange for these weapons, the Iranians gave a "guarantee" that they would neither engage in any "wrong- doing" nor support terrorism. (Ghorbanifar 46) Israel sold Iran 400 TOWs in exchange for Weir, Ghorbanifar recalled; when the plane ar- rived in Tabriz, eight extra TOWs were aboard. (Id. at 49; 100) Ledeen told the Board that he did "not believe that either we or they" saw the August and September shipments as two transactions. (Ledeen (2) 27-28) In the second week of September, Kimche called McFarlane with the news that a hostage would be released, and that he expected all the hostages to be released soon. McFarlane prob- ably relayed this message to the President, Vice President, Secretaries of State and Defense, Di- rector of Central Intelligence, and Regan. (McFarlane (1) 18-19) The Director of Central Intelligence reportedly connected this release with diplomatic efforts in Damascus and Tehran aimed at resolving the hostage prob- lem. (CIA/IG Chronology at 4; Casey to Shultz/McFarlane, 8/16/85; Sigur to McFar- lane, 9/19/85) Reginald Bartholomew, the American Ambassador in Lebanon, reported on September 4 that "North was handling an op- eration that would lead to the release of all seven hostages. [A U.S.] team had been de- ployed to Beirut, we were told. Ambassador Bartholomew had been alerted directly by the NSC and would assist." (Shultz, 12/86, 12) The Director of Central Intelligence told his Deputy and Chief of Operations that "the Israelis were doing something and they believed as a part of the outcome of an affair the Israelis were in some of the hostages could be released," but that the Israelis did not want the CIA to be "notified." (George 3) Since 1984, the CIA had regarded Ghorbanifar as untrustworthy. (Cave 3-5) House told [the releasing agency] that those [reports] were not to be distributed to anybody except the White House." (Wein- berger 8) Meanwhile, Ledeen met Ghorbanifar, Kimche, Nimrodi, and Schwimmer in Paris on September 4. Ledeen told the Board that [t]he bulk of this conversation was given over to the issue of future relations and future cooperation between the United States and Iran. And from time to time Ghorbanifar, Schwimmer and Nimrodi would sit down and start talking about hos- tages and weapons. And when this hap- pened Kimche and I would go off and talk about the future of Iran and how we thought we were going. (Ledeen (1) 44) According to Ledeen, Ghor- banifar predicted that Iranian leaders would soon give speeches in which they did not de- nounce the United States. After the speeches, Ghorbanifar called Ledeen to ask if he had seen them. Ledeen had not, but asked North to have the CIA find and translate them. Some weeks later, the CIA confirmed Ghorbanifar's account. Iranian leaders had attacked the Soviet Union. "So we were cheered by this. I was cheered by this." (Id. at 44-45) On September 15, 1985, Reverend Weir, one of the Americans kidnapped in Lebanon, was freed. According to the CIA Inspector General, on September 16, the Director of Central Intel- ligence and Charles Allen discussed recent events, including Weir's release. The Director reported McFarlane's saying they were related to an NSC intiative. (CIA/IG Chronology at 4) Secretary Shultz testified that, on September 17, Ambassador Bartholomew reported that Mr. McFarlane had said the other hostages would be released in three batches, with- out publicity. But Weir had no information about the others, and in fact said he had been released only to bring pressure for the release of the Da'Wa prisoners. Bar- tholomew was pessimistic. He said four other hostages were reportedly in the -Beirut area, possibly in the same place as Weir. . . . North was not in the area, but in Washington, D.C. Bartholomew said he knew "precious little about origins of this or who is involved. Bud has told me noth- ing of who else was involved." He was pes- simistic about getting any more hostages. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Two months then passed during which, to my knowledge, the Department of State heard nothing more about any aspect of an operation involving arms for Iran. (Shultz, 12/86, 12-13) When Weir was released, McFarlane "learned of the transfer from Israel to Iran of 508 TOW missiles.'s Well, I was concerned," he told the Board in his first interview, "frank- ly, because in concrete terms we, after a month's time, we Americans weren't dealing with Iran, Israel was, and so the central pur- pose from my point of view of the thing wasn't yet being fulfilled." (McFarlane (1) 20) Teicher told the Board that, although his involvement in this operation had ceased in August, after Weir was released, he became suspicious that the United States was trading arms to Iran for hostages. He queried North, who told him that he could say nothing about it, and McFarlane, who said the United States was not trading arms for hostages and that there was nothing more he could say. (Teicher 14-15) (Historical Chronology 5-6) At one of the President's 9:30 a.m. briefings in September (early in the month, according to Regan (Regan 8)), McFarlane reported that the Israelis had sold weapons to Iran, and a hos- tage had been released. McFarlane told the Board: [W]hile I didn't know for certain because we had not negotiated with the Iranians, the appearance was surely there that weap- ons were transferred and one hostage was released, and so that certainly looked causal. And you would have to be a fool not to see that, whatever our intentions 16 The Historical Chronology contains the following para- graph, not contained in the Maximum Version: In late September, we learned that the Israelis had trans- ferred 508 TOW missiles to Iran and that this shipment had taken place in late August. [Handwritten in the margin: "30 Aug?"] The Israelis told us that they undertook the action, despite our objections, because they believed it to be in their strategic interests. The Israelis managed this entire oper- ation, to include delivery arrangements, funding, and trans- portation. After discussing this matter with the President, it was decided not to expose this Israeli delivery because we wanted to retain the option of exploiting the existing Israeli channel with Tehran in our own effort to establish a strategic dialogue with the Iranian government. The total value of the 508 TOWs shipped by Israel was estimated to be less than $2 million. were, the reality was apparently arms for hostages. And I said so to the President in the morn- ing meeting, and it basically kind of vali- dated what the Secretary of Defense and State had said before, and they expressed their concerns again on that score. This is not an excuse, but it is I think miti- gating. Recall now that in this period from late September to November quite a number of things were happening in the government, and this was about number 12 on the agenda. I mean, you had the Soviet foreign minister in town, three other foreign heads of state, the prepara- tion of four major presidential speeches to lay out the agenda for the summit, bilater- al, regional issues, arms control issues, human rights issues, a visit to the United Nations by the President for a couple of days, meetings with 12 or 15 heads of gov- ernment up there, and in the middle of that the Achille Lauro. (McFarlane (1) 20-21) As we have seen, Regan told the Board a somewhat different story.17 (See supra pages B23-24) 17 In a memorandum, dated December 5, 1985, North provid- ed still a different account of the origins of Iran arms transac- tions. He wrote that "[s]everal months ago" an agent involved in shipping material to the Contras saw U.S. military equipment in a Lisbon warehouse, which inquiries identified as Israeli equipment being shipped to Iran by a private company. A "high-level Israeli official" explained that the weapons were being sent to Iran in exchange for Iranian Jews, and that because private intermediaries were used, the transaction was not a tech- nical violation of United States arms export control laws. The Is- raelis hoped the arms sales would enhance "the credibility of moderate elements in the Iranian army" who might become pow- erful enough to establish a more reasonable Iranian government than presently existed; prevent the collapse of Iran in the war with Iraq; and extricate Jews from Iran. In early September, in order that we not take action to ter- minate the arms sales, the Israelis proposed that this process be used as leverage to recover the American citizens held hostage in Lebanon. It was decided to test the validity of this proposal and on September 14, the Israelis, using chartered aircraft, delivered 500 TOW missiles to Tabriz, Iran. Prior to commencing this operation, we committed to the Israelis that we would sell them replacements for the items they sold and delivered to Iran. Two days later Reverend Benjamin Weir was released. ("Special Project re Iran," 12/5/85) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 I don't recall anything else happening, except I believe that Benjamin Weir did come out at that time, if I'm not mistaken, or shortly thereafter. The only thing I can remember there [about the need to resupply Israel] is that there was talk that probably someday the Israelis will want us to replenish that, but no specific the Israelis have asked us to re- place that at this time, no. (Regan 9-10) B. Financing the Transaction penses and provide a return to financiers who invested with him. (Id. at 31, 8) Possibly in anticipation of this transaction, on August 27, 1985, the Central Bank of Iran (Bank Markazi) deposited $1,217,410 in the ac- count of an Iranian official at Credit Suisse. This individual, an official in the Prime Minis- ter's office, was responsible for arms procure- ment in Europe. On September 18, four days after the first successful shipment of TOWs, $5 million was deposited in the Iranian's account. On September 14, Ghorbanifar informed the holder of the Credit Suisse account that an air- craft would arrive at Tabriz that evening, and asked that a man on the plane be given a cheque and a list of weapons desired by Iran. According to Furmark and Ghorbanifar, Kha- shoggi provided the bridge financing for the August and September shipments.18 The Americans and Israelis had limited faith in the Iranians, and vice versa, so that deliveries would not be made before payment was re- ceived, and payment would not be made before weapons were delivered. (Ledeen (2) 25) Kha- shoggi broke the impasse by providing financ- ing. (Furmark 5; D. St. John, Memorandum of Conversation with Adnan Khashoggi, 1/29/87) In August and September 1985, Khashoggi made two separate deposits in the amounts of $1 million and $4 million into a Swiss account designated by the Israelis; Ghorbanifar gave him two post-dated drafts for $1 and $4 mil- lion, drawn on his account at Credit Suisse, which Khashoggi would negotiate when the weapons were delivered, and Ghorbanifar had received payment from Iran. "[T]hat is how the financing was done all throughout." (Furmark 6) Khashoggi was repaid later than anticipated because the first shipment of TOWs included weapons unacceptable to Iran. (Id. at 6-7) Ac- cording to Furmark, Khashoggi received no money in addition to principal for these pay- ments; for the later transactions, he expected, and received until May 1986, a return of 207o above the principal amount to cover his ex- 18 Whereas Furmark told the Board that he introduced Ghor- banifar to Khashoggi in January 1985, (Furmark 3), George Cave, who had been stationed in Tehran before the overthrow of the Shah and who had been responsible for terminating the CIA's re- lationship with Ghorbanifar in 1983, told the Board that, con- trary to reports he had seen, Ghorbanifar had known Khashoggi for years. (Cave 44) V. United States Involvement Takes a New Form: October 1985 January 1986 The United States formally adopted a pro- gram to transfer advanced weapons to Iran in January 1986. That step culminated a process formed by, among other things, operations by various government bureaucracies and individ- uals, and the unending pressure created by the kidnappings in Lebanon, including hopes that just one more effort would bring the hostages home. Each individual, including the President, had his own perspective of the political and strategic significance of what he knew. These perspectives and pressures shaped the process of Presidential decision and the ultimate deci- sion itself. A. Prelude to the Israeli Shipment of Hawk Missiles According to Ledeen, North became obvious- ly involved in operations connected with Amer- ican hostages and relations with Iran at the time of the first Israeli shipment of TOWs. "[H]e was handling all the various intelligence operations that had been started to track this thing, and it was all coming through him." 19 19 Ledeen told the Board that McFarlane did not tell him that North was to be more involved. (Ledeen (1) 51) Bernard McMa- hon, Staff Director of the Senate Select Committee on Intelli- gence, said that Ledeen testified that North told him in Septem- ber 1985 that "McFarlane has told me I'm supposed to now handle all the operational aspects of this, and McFarlane has no knowledge, A, that Ledeen is doing anything, much less that North has taken over what he is doing." (B. McMahon 10) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 (Ledeen (1) 51) On the other hand, North's office "was highly compartmentalized. [Ledeen] did not, until I was instructed by Bud to do so, I never told Ollie [North] what was going on, and Ollie never discussed what he was doing with me." (Id. at 57) Ledeen's account of the September-October 1985 period is sketchy. For example, he told the Board that he introduced North and Schwimmer when Ghorbanifar, Schwimmer, and Nimrodi came to Washington in late Octo- ber or early November. (Id. at 50) According to North's calendar, North had meetings on Sep- tember 26 with Ledeen at 11:00 a.m. and Schwimmer at 11:30 a.m. On October 6, North asked the CIA to arrange for surveillance of Ghorbanifar and Nimrodi, whom he expected in Washington on the 7th. Such surveillance was put in place, and, on October 8, Ledeen, North, Nimrodi, Schwimmer, and one "Nicho- las Kralis" (a Ghorbanifar alias) met at 9:00 a.m. in the Old Executive Office Building. (North calendar) On October 1, 1985, Israel's air force bombed the PLO headquarters in Tunis, and on October 4, according to NSC staff chronolo- gies prepared in November 1986, the Islamic Jihad announced the execution of Buckley in retaliation for the bombing.20 The NSC staff chronologies state ' that "[t]his announcement led to a series of meetings in Europe among the U.S. (CIA and NSC), Israeli, and Iranian in- termediaries." (Maximum Version 4; Historical Chronology 6) On October 7 the Italian ship Achille Lauro was hijacked by Palestinian terror- ists. Ledeen met Ghorbanifar, Kimche, Nimrodi (who was fluent in Farsi), and Schwimmer in September and October in Europe. (Ledeen (1) 46) In at least one such meeting, Ghorbanifar expressed the view that the arms and hostage matters, which engaged Schwimmer and Nim- rodi particularly, should be dropped, and the prospective Iranian-American political relation- ship should be the focus of their energies. "[Ghorbanifar] said if we continue we shall become hostages to the hostages." (Id. at 47) 20 According to both the Maximum Version and the Historical Chronology, this announcement was false. Iranians with whom CIA and NSC staff personnel met in the following months, and Jenco and Jacobsen, two hostages released later, reported that Buckley probably died on June 3, 1985, of "pneumonia-like symptoms." (Maximum Version 5; Historical Chronology-6) In his second interview, Ledeen told the Board that, in October, he told Schwimmer: if this kind of contact is going to continue it may be necessary at a certain point to have an account where there can be some- thing for expenses for this person or per- sons like him. We may need an account for such things. And he said fine. I will do that. And he then opened an account at Credit Suisse and gave me the account number for this thing. I had no privileges on it. I couldn't sign for it. But he gave me the number. He said if at any point people want to put money in this, this is the thing which we have established for this purpose, if it would be necessary at a later date. I gave that number to Ollie [North]. I have no knowledge of that account ever being used for anything. I don't know of any money that ever went into it. But I re- called this when I was reading a newspaper story the other day which suggested that Ollie had inherited a structure of bank ac- counts in which there was already some- thing there, into which money could flow, or through which money. could flow, or something like that, and that reminded me that, hey, I remember that day they created that account. (Ledeen (2) 41-42) Ledeen reported these conversations to McFarlane and, in late October or early No- vember 1985, when Ghorbanifar, Nimrodi, and Schwimmer came to Washington, he "urged that the hostage matter be dropped, and he [McFarlane] was in agreement with that." (Id at 50) So about a week afterwards I reported on this meeting to Bud, and I said again to him that I thought we should shut down the hostage matter and pursue the political business. He said that no, he was inclined to shut down the whole thing, that he had a bad feeling about the whole matter. He didn't like it. . . . I appealed to him not to stop the whole thing but just to stop the Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 hostage side of it. And he said, well, he would get back to me, and so off I went. McFarlane told the Board in his second inter- view that Ledeen's memory was accurate. As I speculated earlier, I was surprised by the move from 100 to at least 400 and by the release of only one. The President was pleased by the release of one and/or the continuation of the relationship. But that seemed to me a very clear evidence of bad faith, and I said so to Mr. Kimche, prob- ably because I met with Mr. Ledeen, al- though I don't know that, but I made it very clear, and I think he's testified to the fact that I had a "bad feeling" about this program in October. And he expressed that, too, to the Israelis. Chairman Tower: Bud, do you remember any comment from the President after Weir was released? He made some rather critical comments of the Administration and of the President, characterizing Weir as being somewhat ungrateful for the ef- forts that were being made. Mr. McFarlane: I don't recall that. I think it is very plausible to me that he would have been dismayed by the turn of events. Mr. Dawson: Before we tie in this authori- zation to December let me not leave Sep- tember for just one second and try to turn the authorization question, present it somewhat differently. In the July, August and September time, in discussions that you had with the President did he ever exhibit any reluctance, opposi- tion or disapproval or make any attempts to repudiate in your presence the transfer of arms by Israel to Iran? Mr. McFarlane: No, he did not. (McFarlane (2) 34-35) After McFarlane gave his view of the August/ September TOW shipment to Ledeen, the arms transfers to Iran took on a new dimension. The first Ledeen said he heard of it came in what he described as a "bizarre" call from Ghorbanifar. It was related, I [Ledeen] subsequently figured out, to the question of this shipment of additional weapons and Ghorbanifar called with a message from the Iranian Prime Minister to the President and asked me if I would transmit this. It was a message that said, grosso modo, we have been very patient with you people. We have behaved honorably with you people. We have done everything that we said we would have done, and now you are cheating us and making fun of us and so forth, and would you please do what you said you were going to do. (Ledeen (1) 51-53) McFarlane being in Geneva with the President for the first Summit Meeting with General Secretary Gorbachev, Ledeen passed this message to Poindexter. It was Le- deen's "first and last" contact with Poindexter on this matter; Poindexter said "I was going to be taken off this matter, that people with more technical understanding or expertise were going to be" on it. (Id. at 53-54) McFarlane told the Board that the episode mentioned by Ghorbanifar to Ledeen "was the first time that a U.S. government agency became involved in this matter, and it was the CIA." (McFarlane (1) 22) "[R]ight before I left for Geneva [for the Summit with Ghorbani- far]", Mr. Farlane told the Board in his second interview, Israel Defense Minister Rabin saw McFarlane in Washington. "I believe that his [Rabin's ] purpose in coming was simply to re- confirm that the President's authority for the original concept was still valid. We haven't changed our mind and I reconfirmed that that was the case. I don't recall that he said any- thing about any concrete intention in the short term to do anything else." (McFarlane (2) 36) While he was in Geneva, Rabin called on an open line from New York to request assistance for a problem involving a transfer. McFarlane then called Poindexter and North and asked them to find out what the problem was. (McFarlane (1) 23) About a week earlier, on November 14, McFarlane had told the Director of Central Intelligence and John McMahon, his Deputy, "that Kimche was planning or had in- dicated that the Israelis planned to give some arms to moderates in Iran that would oppose Khomeini." 21 U. McMahon 5) At that time, 21 According to North's office calendar, North, McFarlane, and Kimche met on November 9, 1985. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 North was in London meeting Terry Waite and, separately, Ghorbanifar. (American Em- bassy, London, to North, 11/12/85; NSC Chro- nology of Events, dated 11/20/86) Secretary Shultz testified before Congress and told the Board that McFarlane told him on November 18, 1985, in Geneva, that four hostages would be released on Thursday (November 21). He said that Israel would fly a plane with 100 Hawk missiles to [a third country], and transfer them to another aircraft. If the hostages were released, the airplane would fly to Iran; if not, it would fly to Israel. Israel would buy replacements for these missiles from the U.S., and would be paid by Iran. I complained to Mr. McFarlane that I had been informed so late that it was. impossi- ble to stop this operation. I nonetheless expressed my hope that the hostages would in fact be released. (Shultz, 12/86, 13; 1/87, 23-24; SRB, 27-28) B. The Shipment of HAWKS: November 1985 2 2 By letter dated November 19, 1985, which North signed with his own name "for" McFar- lane, Secord was asked to play a role. 22 The Maximum Version and Historical Chronologies provide different accounts of the origins of the November 1985 HAWK shipment. According to the Maximum Version: In late November 1985, the Israelis, responding to urgent entreaties from the Iranians, provided 18 basic HAWK mis- siles to Iran in order to improve the static defenses around Tehran. The Israeli delivery of HAWK missiles raised U.S. concerns that we could well be creating misunderstandings in Tehran and thereby jeopardizing our objective of arrang- ing a direct meeting with high-level Iranian officials. These missiles were subsequently returned to Israel in February 1986, with U.S. assistance. (Maximum Version 5) The Historical Chronology states: In mid-November, the Israelis, through a senior officer in the Foreign Minister's office (Kimche), indicated that the Government of Israel was convinced that they were nearing a breakthrough with Iran on a high-level dialogue. The Israeli contacted a U.S. official (North) and asked for the name of a European-based airline which could discreetly transit to Iran for the purpose of delivering passengers and cargo. He spe- cifically noted that neither a U.S. carrier nor an Israeli affili- ated carrier could be used. We were assured, at the time, that the Israelis were going to "try oil drilling spare parts as an incentive," since we had expressed so much displeasure over the earlier TOW shipment: The name of [a CIA propri- etary airline] was passed to the Israeli, who subsequently had the aircraft chartered through normal commercial contract for a flight from Tel Aviv to Tabriz, Iran, on November 25, Your discrete [sic?] assistance is again re- quired in support of our national interest. At the earliest opportunity, please proceed to [a third country transit point], and other locations as necessary in order to arrange for the transfer of sensitive materiel being shipped from Israel. As in the past, you should exercise great caution that this activity does not become public knowledge. You should ensure that only those whose discretion is guaranteed are involved. (McFarlane per North to Secord, 11/19/85) The Board has obtained a number of oper- ational reports sent by North to Poindexter by the Blank Check private interoffice computer communication channel Poindexter had estab- lished on August 31. At about 9:30 p.m. on November 20, North wrote Poindexter: The Israelis will deliver 80 Mod[ified] HAWKS to [a third country] at noon on Friday 22 Nov. These 80 will be loaded aboard three chartered aircraft, owned by a proprietary which will take off at two hour intervals for Tabriz. . . . Appropriate ar- rangements have been made with the proper [country name deleted] air control personnel. Once the aircraft have been launched, their departure will be con- firmed by Agshari [Ghorbanifar] who will call [his contact in Tehran] who will call Niknam (DCM in Damascus) who will direct the IRG [Iranian Revolutionary Guard] commander in Beirut to collect the five rpt five Amcits from Hizballah and de- liver them to the U.S. Embassy. There is also the possibility that they will hand over the French hostage who is very ill. There is a requirement for 40 additional weaps of the same nomenclature for a total requirement of 120. $18M in payment for the first 80 has been deposited in the ap- propriate account. No acft will land in Tabriz until the AMCITS have been deliv- ered to the embassy. The Iranians have 1985. The Israelis were unwitting of the CIA's involvement in the airline and the airline was paid at the normal commer- cial charter rate (approximately $127,700). The airline per- sonel [sic] were also unwitting of the cargo they carried. (Historical Chronology 6) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 also asked to order additional items in the future and have been told that they will be considered after this activity has succeed- ed. All transfer arrangements have been made by Dick Secord, who deserves a medal for his extraordinary short notice ef- forts. Replenishment arrangements are being made through MOD [Ministry of Defense] purchasing office in NYC. There is, to say the least, considerable anxiety that we will somehow delay on their plan to purchase 120 of these weapons in the next few days. IAW [In accordance with] your instructions I have told their agent that we will sell them 120 items at a price they can meet. I have further told them that we will make no effort to move on their purchase LOA request until we have all five AMCITS safely delivered. In short, the pressure is on them. As soon as we have the release confirmed, we need to move quickly with Defense to provide the 120 missiles the Israelis want to buy. They are very concerned that they are degrading their defense capability, and in view of the Syrian shoot-down yesterday the PM has placed considerable pressure on both Rabin and Kimche for very prompt replacement. Both called several times today. There is the distinct possibility that at the end of the week we will have five Ameri- cans home and the promise of no future hostage takings in exchange for selling the Israelis 120 Mod HAWKs. Despite the dif- ficulty of making all this fit inside a 96- hour window, it isn't that bad a deal.. . . Warm regards. Recommend pass to RCM [McFarlane] after review. North. (North PROF note to Poindexter, 11/20/85, 21:27:39) The remainder of the note concerned details about sending "a covert hostage debrief team to Wiesbaden." (Id.) In the morning of November 21, North re- ported to Poindexter a call from Secord. The transit country's Defense Minister had assured Secord that the Prime Minister "had approved the xfer activity for Friday and that the FoMin is aware and supportive." As they were en route to Brussels, North suggested that McFar- lane discreetly thank them for their help. (North PROF note to Poindexter, 11/21/85, 09:18:36. "Please pass to RCM as avail.") The operation began to unravel later that day. Duane Clarridge, in 1985, Chief of the Euro- pean Division of CIA's Directorate of Oper- ations, told the Board that he first became in- volved during the evening of November 21. North called him for help in obtaining an over- flight clearance for an El Al 747. On the 22nd, Clarridge used CIA communications channels to help obtain the clearance. He had the im- pression that North was already "in touch with [the foreign] government at some level." (Clar- ridge 3) At this time, Charles Allen showed Clarridge reports indicating that the flight was part of an operation aimed at the liberation of hostages, but the CIA was permitted to reveal only that the flight had a humanitarian pur- pose. Clarridge informed the U.S. official trying to obtain flight clearance that he should be in touch with a man named "Copp", whom Clar- ridge was told was an alias for Secord. Despite the CIA's efforts, landing rights were denied. As a result, North asked for the name of a reli- able charter airline. Given the shortage of time and the circumstances, CIA's air branch sug- gested the use of a proprietary. The proprie- tary was told to await a call; Clarridge suspects the caller was to be Copp. In any event, the air- line was assured that the caller would have suf- ficient funds for the charter. (Id. at 2-6) When the issue of a CIA proprietary airline was raised, Clarridge said, he became con- cerned about the propriety of CIA action. He asked Edward Juchniewicz, acting Deputy Di- rector of Operations, whether he would ap- prove the operation. He did. (Id. at 4-5) Ac- cording to the CIA Inspector General, Juch- niewicz remembered Clarridge alerting him that North needed an aircraft to transport some unspecified material to Israel, and that North might call him about it. Juchniewicz remembers receiving a call at home that night from North, who said he understood that the Agency had an aircraft and asked whether it would be possible to charter it. Juchniewicz says he told North that the proprietary was a commercial venture and thus available for charter by anyone. He is Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 certain that he did not give North the name of the proprietary, believing North already to be in possession of that informa- tion. Juchniewicz says he did not authorize the use of the proprietary to anyone, but acknowledges that his response could have been interpreted as approval. ([A CIA offi- cer involved] recalls contacting Juchniewicz on or before the morning of 25 November to confirm that the project had been ap- proved, and being given assurances that it had.) (CIA/IG Chronology 7) One of North's contemporaneous messages to Poindexter supports part of Clarridge's ac- count. In the middle of the afternoon, Novem- ber 22, North wrote that landing clearance still had not been obtained. "Despite the difficulties of the past 24 hours, all continue to believe that if RCM can get thru to the PM or FOMIN, that this can be done." (North PROF note to Poindexter, 11/22/85, 19:27:15 ("Status Report as of 1730") North was considering three choices for continuing the operation: (1) chartering a new airline to pick up the cargo in Tel Aviv; (2) flying the three chartered aircraft to Tel Aviv, where the cargo would be loaded and the flight resumed; or (3) flying the three chartered aircraft to Tel Aviv, loading the cargo, and proceeding directly to Iran "w/o filing until airborne. . . ." (Id.) Everybody in- volved "(including Kimche)" believed the first option to be the best. North wrote that "Kimche urges that solution be found to matter this weekend to protect hostages and those who will deliver them." (Id.) At 6:10 p.m., North had more news for Poin- dexter. McFarlane had contacted the Foreign Minister at 5:30; he agreed to permit an Israeli aircraft to land. In addition, North reported on the CIA's efforts: Dewey [Clarridge] has arranged for a pro- prietary to work for Secord (Copp). Copp will charter two 707s in the name 'of LAKE Resources (our Swiss Co.) and have them p/u [pick up] the cargo and deliver it. . . . [T]he cargo will be xfered to the three Is- raeli chartered DC-8/55s for the flight to T[abriz]. Though I am sure Copp suspects, he does not know that the 707s belong to a proprietary. Clarridge deserves a medal-so does Copp. Kimche (DK) has been told how screwed up his people are in planning something like this on such short notice. Not only was the 747 they planned to use a national air- lines a/c [aircraft], but they only had it chartered for 14hrs. We have now taken charge of that phase of the operation . . . to ensure flight clearance for the three DC-8s chartered by DK's boys. If all goes as we now hope, the cargo will be [at the staging area] by noon (local) and enroute [sic] to T shortly after dark. That means we can expect handovers (hopefully) Satur- day night. (Id. ("UPDATE AS OF 1810")) North's optimism was a hope. He wrote Poindexter at 7:00 p.m. that Schwimmer had just reported that he had released the DC-8s, despite a call from North to Kimche to keep them on call. "Schwimmer released them to save $ and now does not think that they can be re-chartered before Monday." (Id. ("UPDATE AS OF 1900")) Secord kept the operation alive. He suggested using one of our LAKE Resources A/C which was . . . to p/u a load of ammo for UNO. He will have the a/c repainted tonight and put into service nlt [no later than] noon Sat so that we can at least get this thing moving. So help me I have never seen any- thing so screwed up in my life. Will meet w/ Calero tonite to advise that the ammo will be several days late in arriving. Too bad, this was to be our first direct flight to the resistance field . . . inside Nicaragua. The ammo was already palletized w/ para- chutes attached. Maybe we can do it on Weds or Thurs. More as it becomes available. One hell of an operation. (Id. ("UPDATE AS OF 1920")) 23 Regan recalled that the President had been informed on the margins of his briefings for the Gorbachev meeting to expect that 23 On November 26, McFarlane wrote North that he was "in- clined to think that we should bring this operation into the NSC and take Mike [Ledeen] out of it but will await John's [Poin- dexter] thoughts. No further communications to Mike on this until I have thought it through. Just tell him that I am thinking about it." (McFarlane PROF note to North, 11/26/85, 12:57:29) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 there is going to be a shipment of arms coming through [a third country] missiles, transshipped through Israel into Iran, and the hostages will come out. (Regan 14-15) C. North's Plan to Free the Hostages On December 4, in a long note to Poin- dexter, North reconstructed the story of the November shipment based on conversations with the participants, conveyed his view of the Iranian-Israeli-American situation at that time, and proposed a plan of action for the future. The attempted transfer through [a third country] of 18 Hawk missiles went awry because the Iranians were in fact seeking a weapons system that would be capable of stopping Soviet reconnaissance flights along the Iranian/Soviet border and on the Iranian/Iraqi border.24 Gorba [Ghorbani- far] rptd that these flights occur regularly and as deep as 40mi inside Iranian air- space. Because Schwimmer and Ledeen were unfamiliar with the operational pa- rameters of the HAWK, they agreed to ship 120 weapons that were totally inad- equate to meet the rqmts established by the Iranians. This delivery has created an atmosphere of extraordinary distrust on the part of the Iranians; [sic] in Kimche's view, because the credibility of the Gorba/ [Iranian] mission has probably seriously been called into question. Despite this perception (Gorba said numer- ous times that this whole thing was a "cheating game" on the part of the Israe- lis),25 Copp & Kimche have been able to proceed with a renewed dialogue which still promises hope for achieving our three objectives: -support for a pragmatic-army ori- ented faction which could take over in a change of government 24 Secretary Shultz testified that, on December 6, Poindexter told him that the transfer "'misfired' when Iran had rejected the shipment as 'too old-1979 markings'." (Shultz, 12/86, 15; 1/87, 26) 25 Ghorbanifar told the Board that this fiasco caused him to explode with rage and anxiety at what he and Ledeen agreed was an example of Israeli incompetence. (Ghorbanifar 117-21) -return of the five AMCIT hostages -no more terrorism directed against U.S. personnel or interests. From these ongoing discussions, which in two cases included Iranian military officers, Copp and Kimche conclude that the mili- tary situation in Iran is desperate. The Ira- nian descriptions of the state of their equipment, lack of competent manage- ment, inability to use much of the remain- ing U.S. materiel portends the real possi- bility of a military collapse (at least by the Army) in the near to mid-term. Thus, there is considerable pressure on the interlocu- tors in Europe to produce-quickly. Given the relatively low level of compe- tence on the part of the Iranians in Europe, and the fact that any supplies de- livered will undoubtedly have to be exam- ined by an Army or Air Force officer, it is very doubtful that a "single transaction" arrangement can be worked out with the parties in Tehran, no matter what is agreed to in Europe. In short, they have been "scammed" so many times in the past that the attitude of distrust is very high on their part. At the same time, in all discus- sions (including today's phone calls) they are desperate to conclude some kind of ar- rangement in the next 10 days and have even asked that the meeting scheduled for Saturday in London be advanced. Based on what we can conclude from intelligence in Beirut, we believe that they are very concerned that the hostages (the only Ira- nian leverage point besides the Jews in Iran) may be killed or captured/released by the Syrians, Druze, Phalange or Amal in the near future. Waite's contacts with the captors seems [sic] to corroborate this as- sessment. In short, time is very short for all parties concerned. Finally, there is the matter of the longer term strategy for what we should be at- tempting to accomplish viz a viz [sic] the Iran-Iraq war and a more reasonable gov- ernment in Iran. From my personal discus- sions with Kimche and Meron 26 it is ap- 26 At this time, Major General Menachem Meron was Director General of the Israeli Ministry of Defense. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 parent the [sic] the Israelis want: the war to continue at a stalemate, a more moder- ate Iranian government in the end and will somehow find a way to continue getting their people (Jews) out of Iran through some kind of barter arrangement. In that the first two of their goals are, it would seem, generally congruent w/ our inter- ests, and their last a fact of life, we should probably be seeing the return of the AMCIT hostages as a subsidiary benefit- not the primary objective, though it may be a part of the necessary first steps in achieving the broader objectives. While Kimche, Meron, Copp and I all agree that there is a high degree of risk in pursuing the course we have started, we are now so far down the road that stopping what has been started could have even more serious repercussions. We all view the next steps as "confidence building" on the part of both sides. None of us have [sic] any illu- sions about the cast of characters we are dealing with on the other side. They are a primitive, unsophisticated group who are extraordinarily distrustful of the West in general and the Israelis/U.S. in particular. They have not the slightest idea of what is going on in our government or how our system works. Today for example, Gorba called Copp in absolute confusion over the fact that Rafsanjani had just received a letter from (of all people) Sen. Helms re- garding the American Hostages. Since the Iranians are adamant that they not be pub- licly connected with the seizure, holding or release of the AMCITS, why, Gorba wanted to know, was Helms being brought into this "solution to the puzzle." Gorba reiterated that "[Vice President Bush] ought to have more control over the mem- bers of his parliament [sic]" than to allow them to confuse an already difficult prob- lem. Dick told him the letter had nothing to do with what we are about, but Gorba did not seem convinced that this wasn't some sort of effort to embarass Iran. Given this very unsophisticated view of things on their part and the distrust that the Iranians obviously feel, we believe that if we stop the current effort at this point and do not at least proceed with a "test" of the current relationship we: -run the risk of never being able to establish a "foothold" for the longer term goals in that the people we are dealing with will be totally discredited at home; and -incur the greater likelihood of re- prisals against us for "leading them on." These reprisals could take the form of additional hostage seizures, execution of some/all of those now held, or both. While the threat to carry out sanctions against us has not, to my knowledge, ever arisen (it certainly has not since Kimche/ Copp/North have been directly engaged- and Michael never mentioned it), it is in- teresting to note that when Copp ques- tioned the bona fides of Gorba and his co- horts as capable of delivering on their end of the arrangement, Gorba carefully noted that since these discussions began w/ Mi- chael & Schwimmer, there has not been a single Islamic Jihad bomb threat, hijacking or kidnapping-and that there would be none if this "worked." D.K., Copp and I regard this to be at least one sign of confi- dence that this activity may yet prosper. There are some lesser indications of confi- dence in recent days: -in response to Copp's demand for funds to be deposited in advance to defray operational costs, and what the Iranians were told were "purchases on the arms market" a total of $41M has been deposited; -the 18 HAWKs delivered last week have been repackaged and are ready for return to origin on the next avail- able flight; -the parties in Europe continue to stress that their requirements are long- term and that they are anxious to get on with a longer range program of Is- raeli originated support which would include technical assistance w/ sophis- ticated hardware which is critically needed but deadlined (in this regard Gorba at one point noted that at times they have as few as 50 operational Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 tanks and less than a dozen flyable air- craft). With all of the above as a lengthy pream- ble describing two nearly frantic weeks w/ the Israelis & Iranians, the following pro- posal has evolved which the Iranians today said they wd like to discuss in detail on Saturday: -The total "package" from the Israe- lis wd consist of 50 I HAWKs w/ PIP (product improvement package) and 3300 basic TOWs. -Deliveries wd commence on or about 12 December as follows: H-hr: 1 707 w/300 TOWs =1 AMCIT H+ 10hrs: 1 707 (same A/C) w/300 TOWs=1 AMCIT H+ 16hrs: 1 747 w/50 HAWKs & 400 TOWs=2 AMCITs H+20hrs: 1 707 w/300 TOWs=1 AMCIT H+24hrs: 1 747 w/2000 TOWs=French Hostage All involved on our side recognize that this does not meet one of the basic criteria es- tablished at the opening of this venture: a single transaction which would be preced- ed by a release of the hostages. However, given the points above regarding the mutual distrust in the dialogue, we all be- lieve it is about the only way we get the overall process moving. Measures have been taken to reduce the chance for du- plicity on the part of the Iranians and to preserve a measure of OPSEC in carrying out the transaction. In the case of a double cross, one of the Iranians will be in the hands of assets we control throughout. One of them . . . has already suffered a se- rious (though apparently not fatal) heart attack after last week's HAWK transaction failed to produce results. The first two de- liveries, via 707 freighters are relatively small and if they do not produce the de- sired outcomes, all else stops. All $ are now under our control. OpSEC concerns are threefold: communi- cations, deliveries enroute to Iran and re- plenishment of Israeli stocks. To solve the first problem an OPs Code is now in use by all parties. This code is similar to the one used to oversee deliveries to the Nica- raguan Resistance and has never been compromised. The delivery/flight planning security problem has been solved by a much more deliberate selection of aircraft and aircrews as well as a series of transient airfields which can be used enroute to the field controlled by the Iranian Army at Tabriz. Appropriate arrangements have also been made to ensure that the over- flight . . . is not challenged. All A/C will be inspected by one of the Iranians at a transient location between Tel Aviv and Tabriz. Before the A/C actually crosses into Iranian airspace, the appropriate release(s) must occur. The last OPSEC concern, that of replenishing Israeli stocks is probably the most delicate issue. The quantity of TOWs requested represents [a significant proportion of] the Israeli PWR [prepositioned war reserves]. Meron and I are working w/ the Israeli purchasing office in NYC to ensure that the replenish- ment can be accomplished [as] quickly after December 12 as possible. All recog- nize that quantities such as those being discussed degrade Israeli readiness and that the items will need to be dispatched quickly in order to preclude disaffection and leaks. Meron has solved at least one of the problems in this regard by identifying a means of transferring the required cash to an IDF account which will allow cash (rather than FMS credit) purchases from the U.S. In order to put this plan into action, Kimche, Copp, Schwimmer and Goode [North] plan to meet in London on Satur- day morning to review all arrangements. If we are satisfied that all our assets (money, aircraft, aircrews, transit facilities, over- flight arrangements and military equip- ment) are prepared, Copp and Kimche will meet at another hotel with Gorba and [an Iranian diplomat] to finalize the plan. Our side will then reconvene later in the evening at our hotel to review any last minute changes. I wd then call you (using the Ops code), transmit the agreed upon Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 arrangements for approval and, if you concur, Kimche & Copp will meet again w/ the Iranians on Sunday a.m. to express our agreement with the plan. Copp & Goode wd return to the U.S. Sunday p.m. on sep- arate flights. On the 11th, the day before the plan is to be executed, Copp will estab- lish a CP [command post] . . . where he can monitor implementation and stop it at any point we desire. The secondary fields . . . will be covered by Copp controlled assets who are not witting of the true origin, destination or contents of the A/C but who can "fix" things in a hurry if something goes wrong. . . . Once in hand, the hostages will be flown to Larnaca on our Navy HH-53 where they will be picked up by a EUCOM C-141 and flown to Wiesbaden for debriefing. The debrief team will be staged at Wiesbaden 12 hours in advance, just as we did two weeks ago without notariety [sic]. Dewey [Clarridge] is the only other person fully witting of this. . . . The Israelis are in the same position. Dewey and I have been through the whole concept twice looking for holes and can find little that can be done to improve it given the "trust factor" with the Iranians. In that all parties in- volved have great interest in keeping this as quiet as possible, . . . we beleive [sic] it to be worth the risk. I have not confided in Dewey re the longer term goals we could/ should hope to achieve. Thus, the only parties fully aware of all dimensions of what we are about are you and RCM [McFarlane]. I have given careful consideration to what you suggested re an RCM meeting with the Iranians in an effort to obtain release of the hostages before starting on an effort to undo the present regieme [sic] in Tehran. Like you and Bud, I find the idea of barter- ing over the lives of these poor men re- pugnant. Nonetheless, I believe that we are, at this point, barring unforseen [sic] developments in London or Tel Aviv, too far along with the Iranians to risk turning back now. If we do not at least make one more try at this point, we stand a good chance of condemning some or all to death and a renewed wave of Islamic Jihad ter- rorism. While the risks of proceeding are significant, the risks of not trying one last time are even greater. (North PROF note to Poindexter, 12/04/85, 02:02:55) D. The President and His Advisors In his first meeting with the Board on Janu- ary 16, 1987, the President said he did not re- member how the November shipment came about. The President said he objected to the shipment, and that, as a result of that objec- tion, the shipment was returned to Israel. In his second meeting with the Board on February 11, 1987, the President stated that both he and Regan agreed that they cannot remember any meeting or conversation in general about a HAWK shipment. The President said he did not remember anything about a call-back of the HAWKs. The Secretary of State testified: November 21-the supposed release date-passed with no release. On November 22, I was told by my staff that the release had slipped again, alleged- ly to get airspace clearance . . . . Also on that day, however, Ambassador Oakley-as these things happen, word kind of drifts around and your stuff, which you don't know whether it is right or wrong-Ambas- sador Oakley reported to us that he had heard from various sources that the hos- tages would be released that afternoon, in exchange for 120 HAWKS at $250,000 each-worth $30 million in all. By this time we were back in Washington. At a discussion in my presence on that day, [Mr. Michael Armacost] stated: "I don't like it. It's terrible." I indicated my own apprehension. Deputy Secretary Whitehead noted: "We all feel uncomfortable." I replied: "Bud says he's cleared with the President." I regarded it as a $30 million weapons payoff. On November 23, we heard again that no hostages were out, that the project had col- lapsed. I said, "It's over." Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 (Shultz, SRB, 28) The President was informed "on the margins of his briefings for the Gorbachev meeting to expect that there is going to be a shipment of arms ... missiles, transshipped through Israel into Iran, and the hostages will come out." (Regan 14) Around the time of the Geneva Summit, McFarlane told the President "that something had happened and the shipment didn't take place as originally scheduled." (Id. at 12) Regan recalled that the President had been "upset" about the September shipment. (Id. at 9) Regan explained McFarlane's belief that the President had authorized the transac- tion as follows: the President "hadn't raised Cain about the [first] Israeli shipment, so a second try might not be out of order...... Cer- tainly there was nothing said to the President in advance, at least in my hearing, where it was said, now may we ship missiles to Iran through Israel. That was not asked of the President." (Id. at 14) In his second interview with the Board,_ McFarlane expanded his first account. I think it would be accurate to say that the President believed in August that he was approving the Israeli sale of modest levels of arms of a certain character, filling cer- tain criteria, but that with that approval Israel could transfer or sell modest levels without further concrete approval.. Now as a separate but obviously related matter his concurrent expectation was that how that would be translated would be 100 TOWs. As far as the November shipment, then, I don't recall that having been a matter considered in Washington, raised to the President and decided. When I learned about it I did report it to the President and to the Secretary of State and to Mr. Regan in Geneva. I recall a conversation from Geneva with the Secretary of Defense, but I don't want to-I couldn't say beyond just the fact that it occurred because I always called him every day to debrief him on the meetings with Gorbachev, and so it might have been that. But, at any rate, I raised it with the Presi- dent, Mr. Regan. The routine in Geneva was that each morning before the prebrief- ing for the Gorbachev meetings he would have just a short meeting on other Presi- dential matters in his residence, and for that the Secretary of State and I and Mr. Regan would go to the chateau and meet with him for 15 minutes or so on non- summit issues, and that would have been where it would have been raised. Then we left and walked over to the mo- torcade and on to the summit. Well, I wouldn't have reconfirmed it [the President's authorization] if I wasn't fully confident of it, and that could have been on the basis of what was a fairly routine re- porting of any information that I had on this, that I would pass it on to the Presi- dent and he would react to it, and his reac- tion was always well, cross your fingers or hope for the best, and keep me informed. But I was never to say at any point stop this or disapprove of it. General Scowcroft: But nobody talked to you about during the period from Septem- ber through your learning of this shipment about the possibility of another shipment, about arrangements or anything like this before Rabin meets with you or the next day when he calls and says we're shipping something and we're in trouble?. Mr. McFarlane: I have no concrete recol- lection of anything like that. I can imagine that meetings took place, but I don't know of any idea of a number of weapons to be sent over. I remember, for example, one time Mr. Ledeen conveying a concept-it was not a hard proposal-that the United States send Phoenix and one or two other kinds of precision guided systems, and it was out of the question. I said no. But never any numerical kind of X day, Y weapons to Z place. (McFarlane (2) 39-43) E. The First Draft of a "Finding": November 1985 When John McMahon, at that time Deputy Director of the CIA, heard that a CIA proprie- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 tary was involved in the November operation and that the Agency had asked foreign govern- ments to grant overflight clearances for Israeli aircraft, he asked for a "Finding". Sending cables was one thing; shipments to Iran, what- ever their character, was another. (Clarridge 9) In view of the arms embargo and other con- trols on trade, they smacked of an operation. U. McMahon 5; Clarridge 9) Under section 662 of the Foreign Assistance Act of 1961, as amended, 22 U.S.C. ? 2422, the CIA may not use appropriated funds to con- duct operations (other than to obtain "neces- sary intelligence") in foreign countries "unless and until the President finds that each such op- eration is important to the national security of the United States. Each such operation shall be considered a significant anticipated intelligence activity [covert operation] for the purpose of section 501 of the National Security Act of 1947." Section 501(b) of the National Security Act of 1947, as amended, 50 U.S.C. ? 413, pro- vides, in part, that, where prior notice of covert actions is not given to the House and Senate intelligence committees, the President "shall fully inform the intelligence committees in a timely fashion of intelligence operations in for- eign countries, other than activities intended solely for obtaining necessary intelligence, for which prior notice was not given under subsec- tion (a) and shall provide a statement of the reasons for not giving prior notice." NSDD 159 set forth procedures regarding implementation of these provisions, as well as for review of covert actions. McMahon wrote on December 7, 1985, that, when he was informed about the CIA's involve- ment in the November shipment, he "went through the overhead pointing out that there was no way we could become involved in any implementation of this mission without a find- ing." (McMahon, "Memorandum for the Record," 12/7/85; J. McMahon 6) Juchniewicz first protested that "[w]e didn't do it; they came to us, and we told them we couldn't do it, so they asked us for the name of an airline, and we gave them the name of our proprietary." U. McMahon 6) He explained that [w]hen General Secord visited the Agency he tried to get leads on airlines that might be available to move equipment to the Near East in a secure fashion. We told him we did not have any such airlift capability. However, Mr. Juchniewicz said it was pointed out to General Secord that there was a commercial airlift that might do it. . . . General Secord then took it from there and made arrangements for a flight on a strictly commercial basis. (Memorandum for the Record, supra.) McMa- hon nonetheless directed operations officers to brief Stanley Sporkin, at that time General Counsel of the CIA, and prepare a Finding. McMahon told Sporkin to draft it to "cover ret- roactively the use of the Agency's proprietary." U. McMahon 6; Memorandum for the Record, supra) Sporkin recalled thinking a Finding was prudent, but not required by law in this in- stance. (Sporkin 7-8) He included language ratifying prior acts by the CIA, and McMahon accepted it. (Id.) Sporkin's draft Finding for the President pro- vided: I have been briefed on the efforts being made by private parties to obtain the re- lease of Americans held hostage in the Middle East, and hereby find that the fol- lowing operations in foreign countries (in- cluding all support necessary to such oper- ations) are important to the national secu- rity of the United States. Because of the extreme sensitivity of these operations, in the exercise of the President's constitution- al authorities, I direct the Director of Cen- tral Intelligence not to brief the Congress of the United States, as provided for in Section 501 of the National Security Act of 1947, as amended, until such time as I may direct otherwise. Description The provision of assistance by the Central Intelligence Agency to private parties in their attempt to obtain the release of Americans held hostage in the Middle East. Such assistance is to include the provision of transportation, communications, and other necessary support. As part of these efforts certain foreign material and muni- tions may be provided to the Government of Iran which is taking steps to facilitate the release of American hostages. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 All prior actions taken by U.S. Government officials in furtherance of this effort are hereby ratified. (Draft Finding enclosed in Casey to Poindexter, 11/26/85) After speaking to Poindexter about this draft, the Director of Central Intelligence sent it to him on November 26, confirming that it "should go to the President for his signature and should not be passed around in any hands below our level." (Casey to Poindexter, 11/26/ 85) Despite some testimony to the contrary, the President appears not to have signed this Find- ing. McMahon told the Board that his records showed that someone told him on December 5 that the President had signed. U. McMahon 7; Memorandum for the Record, supra) Sporkin remembered that "[a]nother person who worked for me told me that at one point he was with Mr. North and Mr. North said: I want to give a message to Sporkin, that I've got a piece of paper that was signed, or some such thing as that." (Sporkin 8) In November 1986, North told the Attorney General that he never saw this draft. (Meese notes of interview with North, 11/22/86) F. December 1985: Bird's Eye View At the beginning of December 1985, McFar- lane resigned and Poindexter succeeded him as Assistant to the President for National Security Affairs. The next day, December 5, Poindexter told Secretary Shultz "the operation was at a decision point, and that he had set up a meet- ing for Saturday, December 7." 27 (Shultz, 27 Armitage had lunch with North in late November, after seeing reports that someone in the White House was meeting with Iranians. North acknowledged meeting Iranians in Europe, and Armitage said to him, I don't think my boss knows anything about this. I doubt that Secretary of State Shultz knows anything about [this]. I think your ass is way out on a limb and you best get all the elephants together to discuss the issue. Ollie was, I think, a little shocked that I was so strong about the necessity of getting everybody together. (Armitage 4-5) Ambassador Oakley, the Near East and South Asia bureau at the State Department, told the Board that he and Under Secretary of State for Political Affairs Michael Armacost forced an NSPG meeting to be held at this time. (Oakley 4) SRB, 29) According to notes of the Secretary's side of the conversation taken by the Secre- tary's Executive Assistant, Poindexter said there would be "[n]o calendar to show it." The Sec- retary of State "said the operation should be stopped; that I had been informed that Iran was playing a big role in Lebanon which even Syria could not influence. I told him: `We are signalling to Iran that they can kidnap people for profit."' (Id.) In the course of this "long phone call," (id. at 30), in which, according to notes by the Secretary's Executive Assistant, Poindexter gave Secretary Shultz more infor- mation that McFarlane ever had, Poindexter may have made use of a memorandum, dated December 5, 1985, apparently by North. Poin- dexter told the Secretary of State "that 3,300 TOWs and 60 HAWKs were being discussed." (Id.) North's memorandum briefly summarized the history of the transactions with Iran through Weir's release and then described the current situation. The Iranians have significant interest in continuing this process. They are under extraordinary military pressure from Iraq and are, by their own admission, subject to regular overflights of Iranian territory by Soviet aircraft. They currently have no ca- pability to deal with this affront and find themselves in an increasingly desperate sit- uation vis-a-vis Iraq. They have urged the Israelis, with whom they are in contact, to continue the process which resulted in the release of Benjamin Weir. Our continuing efforts to achieve release of the hostages through diplomatic and other means have proven fruitless. There are numerous indications including reports from the special representative of the Archbishop of Canterbury, Terry Waite, that time is running out for the hostages. We are relatively confident of information that former Beirut Chief of Station, Bill Buckley, is dead. We also know, from Waite's November 14 visit to Beirut and a separate contact through Canada, that the other five hostages, Anderson, Jacobsen, Jenco, Kilburn, and Sutherland are still alive. Waite and others credibly report that those who hold the hostages are under im- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 mense political and military pressure from the Syrians, Druze, Phalange, and Amal and that there is the distinct possibility that our hostages as well as the French and British could be killed in the near future. The Iranians, who have been in contact with the Israelis, are cognizant of the pres- sure being placed on the Hizballah surro- gates in Lebanon and that it is entirely likely that the only leverage they will have over us (the hostages) may no longer be available in the near future. These Irani- ans, the same that arranged the release of Weir, have now proposed that in exchange for an immediate delivery of 3,300 TOW missiles and 50 Improved HAWK Surface- to-Air missiles from Israel, they will guar- antee: -The release of the five Americans and one of the French hostages still being held. -No further acts [of] Shia fundamen- talist terrorism (hijackings; bombings, kidnappings) directed against U.S. property or personnel. There is considerable reason not to accept this proposal. It is contrary to our stated policy of not making concessions to terror- ists or those who sponsor them. It is also possible that such an arrangement is a "double-cross" in that the Iranians can not or will not release the captives as agreed. Such an arrangement, bartering for the lives of innocent human beings, is repug- nant. Finally, the quantities which the Ira- nians wish to purchase will significantly de- grade Israeli stockpiles and require very prompt replenishment. U. S. Interests: Notwithstanding the undesir- able nature of such a transaction, it must be noted that the first two Israeli objec- tives are congruent with our own interests: -A more moderate Iranian govern- ment is essential to stability in the Per- sian Gulf and MidEast. -Such a change of government in Iran is most likely to come about as a consequence of a credible military es- tablishment which is able to withstand the Iraqi onslought [sic] and deter Soviet adventurism/intimidation. The Iranian army (not the Revolutionary Guards) must be capable of at least stalemating the war. -Shia fundamentalist terrorism is a serious threat to the United States which has long-term adverse conse- quences for our interests and we must endeavor to stop its spread. -The return of the American hos- tages will relieve a major domestic and international liability-in addition to its obvious humanitarian aspect. The first three of these goals may well be achievable-and the fourth accrued as a subsidiary benefit-by commencing the process of allowing the Israeli sales as pro- posed by the Iranian agents in Europe. It is unlikely, however, that we can proceed further toward the first three-and not at all on the hostage release unless we allow the process of delivery to begin. Discussions toward this end have been pro- ceeding among the Israelis, Iranians and a U.S. businessman acting privately on behalf of the USG for nearly three weeks. There are several indications of confidence that an arrangement can be consummated in the next 10 days which would result in the release of the hostages and commence- ment of a process leading toward the first three objectives above. The military situa- tion in the Iran/Iraq war and the increas- ing pressure on the Hizballah in Lebanon both point toward immediate action. There is also, as the Iranian intermediaries point- edly noted last week, a complete absence of any Shia fundamentalist hijackings, as- sassinations, hostage seizures, or bombings since this dialogue began in September. While there have not been expressed or implied threats by the Iranians in these di- cussions, the Israeli and U.S. private citi- zen participants believe that if the current effort is not at least tried, we run the risk of abandoning both the longer term goals and the likelihood of reprisals against us for "leading them on." These reprisals would probably take the form of additional hostage seizures, execution of some/all of those now held; or both. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Next Steps: The Iranians, the Israelis, and our U.S. businessman plan to meet in London on Saturday, December 6 to dis- cuss whether or not to proceed with the sale of the TOWs and HAWKs. The Israeli government has informally told us that if they can be assured of "prompt" resupply, they will sell the quantities requested from their prepositioned war reserve. 3,300 TOWs represents [sic] [a significant pro- portion] their available supplies. The U.S. businessman has arranged for the charter of two non-U.S. registered aircraft for use in the deliveries. The total delivery would be conducted in 5 flights from Tel Aviv to Tabriz, Iran via interim airfields in Europe. . . . Each delivery is to result in the release of a specified number of hos- tages. Arrangements for the interim air- fields, overflight rights, and flight plans have been made, some with the help of the CIA. A communications code to preserve operational security is available for use by all parties. All aircraft would be inspected by an Iranian at one of the transient loca- tions between Tel Aviv and Tabriz. The entire evolution is designed to be complet- ed in a 24 hour period. It can be stopped at any point if the Iranians fail to deliver. The greatest operational security concern is that of replenishing Israeli stocks. The Israelis have identified a means of transfer- ring the Iranian provided funds to an Is- raeli Defense Force (IDF) account, which will be used for purchasing items not nec- essarily covered by FMS. They will have to purchase the replenishment items from the U.S. in FMS transaction from U.S. stocks. [sic] Both-the number of weapons and the size of the cash transfer could draw atten- tion. If a single transaction is more than $14.9 M, we would normally have to notify Congress. The Israelis are prepared to jus- tify the large quantity and urgency based on damage caused to the equipment in storage. If this process achieves the release of the hostages and proves the credibility of the Iranian contacts in Europe, Bud McFarlane would then step in to supervise achieving the longer range goals. Additional meet- ings with the Iranians would be arranged to further our objectives without requiring such large scale sales/deliveries by the Is- raelis. Approval is now required for us to take the next steps on Saturday. After carefully con- sidering the liabilities inherent in this plan, it would appear that we must make one last try or we will risk condemning some or all of the hostages to death and undergo- ing a. renewed wave of Islamic Jihad terror- ism. While the risks of proceeding are sig- nificant, the risks of not trying are even greater. ([North], "Special Project Re Iran," 12/5/85) The President met his principal national se- curity advisors on December 7 in his residence. The President, Secretaries of State and De- fense, Deputy Director of the CIA, McFarlane, Poindexter, and the President's Chief of Staff attended. (Ellen M. Jones, Presidential Diarist, to Jay M. Stephens, 1/24/87 (information from the Presidential Calender, which apparently is called a Diary)) Recollections of the meeting vary. In his meeting with the Board on January 26, 1987, the President said he recalled discussing a com- plex Iranian proposal for weapons delivered by the Israelis in installments prior to the release of the hostages. The President said that Secre- tary Shultz and Secretary Weinberger objected to the plan, and that this was the first time he "noted down" their opposition. The President said that the discussion at the meeting pro- duced a stalemate. The Attorney General remembered attend- ing; he did not think McFarlane was present, and thought that Fortier probably attended. (Meese 4) The subject of the meeting-the Iran transactions-was announced in advance, and the principals had time to prepare. (Shultz, SRB, 31; Armitage, 5) According to the Secre- tary of State, Poindexter suggested that Mr. McFarlane could contact the Iranians in London to ask them to release the hostages without getting equipment. If they would do so, we, then, would be prepared for a better relationship with them. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 I fully supported this proposal. Vice Admiral Poindexter suggested that Mr. McFarlane should be authorized to ask the British to sell arms to Israel [?Iran] if the Iranians rejected his first proposal. I opposed this idea. I said it was still U.S. arms, that it was a more complicated deal that would make us even more vulnerable. Other views were expressed. No decision was made, however, at that meeting, as far as I could see.... On December 7, Vice Admiral Poindexter told me privately that the project had fallen apart during Thanksgiving week. That is thinking back to that period. He said he had recommended to the President that we disengage, but that the President did not want to. I felt in the meeting that there were views opposed, some in favor, and the President didn't really take a position, but he seemed to, he was in favor of this project somehow or other. And, of course, by now he has said publicly that he was in favor of work- ing at the Iranian operation and being will- ing to sell arms as a signal, as he has now put it. (Shultz, SRB, 31-32) When the Secretary of State returned to his office, he told his staff that Secretary Wein- berger and Regan also strongly opposed the initiative. The Secretary of Defense spoke for thirty minutes. The Secretary told his staff he felt that he perhaps should have barged in ear- lier and confronted the President. The prob- lem, he felt, was that McFarland did not tell him the whole story. The Secretary of Defense had a different recollection of the meeting, which he remem- bered as taking place in the Oval Office. [T]here was a quite specific, more detailed proposal that there had indeed been nego- tiations and discussions between somebody representing McFarlane's office and some Iranians who were reported to be moder- ates. I think at that meeting John McMa- hon was there. I'm not sure. Bill Casey may have been, or they both may have been. But there were some adverse com- ments passed about the veracity of the Ira- nians involved, I think Ghorbanifar or some such name, but a more formal pres- entation was now made by McFarlane about what could be accomplished with this and points with respect to getting a better relationship with Iran as well as hopes that they might have a favorable effect on the release of the hostages. Again, I opposed it very strongly and said I thought really it was a terrible idea and that the transfer of arms which was part of the plan which was to be done to establish the good faith of the negotiators-I think I made some comment about what about the good faith of the Iranian negotiators, and why-went through a whole catalogue of things which didn't require any gift of prophecy as to what would happen if this became public. . . . [T]he advice I gave in this case was as firm as I could do it, obvi- ously not persuasive enough but as persua- sive as I could do it, that all kinds of very unfortunate effects would result if this took place, that we were pleading with a large number of countries not to do this, that Jordan and Egypt regarded Iran as at least as much of a great Satan as they regarded us, and that it would be a very bad thing in every way to do, and that it wouldn't ac- complish anything, and that they would un- doubtedly continue to milk us. At this time again, the Israeli connection or the Israeli support of such a transaction I guess is the better way to put it, was ad- vanced by McFarlane. And I said that an- other of the problems that I thought with it was that doing anything of this kind and attempting to keep it on a clandestine basis would leave us open to blackmail of the very most elementary kind by the people who knew about it, that is, the Israelis and also Iranians, and that any time they weren't getting what they wanted, they could in one way or another, in Mideast fashion, go public with it and cause all kinds of problems with it, that there was no way that I ever felt I could talk with [moderate Arab States] again if we were supplying arms to [a] bitter enemy when we wouldn't supply arms to him et cetera, et cetera, just a whole series of arguments. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 George Shultz made some very strong ar- guments along the same line . . . A very strong, very persuasive argument. And again, my impression pretty clearly was that the President agreed that this couldn't be done, that it might be a good thing to achieve these objectives but it wouldn't work, and that this was not a good way to do it. (Weinberger 9-12) Armitage remembered the Secretary of Defense saying that he and Secre- tary Shultz "thought they had `strangled the baby in the cradle'." (Armitage 6) In his first interview with the Board, McFar- lane recalled suggesting to the President on December 1 that the negotiations with the Ira- nians "seemed to be getting skewed towards arms going that way and hostages coming this way. . . . I thought we ought to seek a meet- ing directly with the Iranians and discontinue any kind of sponsorship of arms transfers." (McFarlane (1) 25) In this interview, McFarlane remembered the President's suggesting an NSC meeting to consider it. (Id.) At the meeting, we went through the record of what had occurred since August in terms of Israeli transfers and the absence of meetings, and at consensus, the unanimous view of all of his advisors, the President decided: All right, you go to London, McFarlane, and you meet with the Iranians and make clear that we remain open to the political dis- course, and here it is. And there were about four generic areas that we wanted to talk to Iran about, our disagreements and so forth. And the second point is that we will not transfer nor encourage any other govern- ment to transfer weapons to them. (Id. at 26) McFarlane gave the Board a fuller account in his second interview. [R]ight after the summit, after I got back from debriefing the Holy Father and Mit- terand and Prime Minister Thatcher, we had some time to look at other things, and I didn't even come to the office. I went di- rectly from London to Washington to Cali- fornia but had two days before the Presi- dent got there to just kind of think through how things had gone, and they hadn't gone very well. The idea originally of us getting in direct communication with Iranian officials hadn't happened, and instead this imperfect dem- onstration of bona fides had been imper- fect, rather dramatically, and had become their priority, with a very clear lack of good faith, I thought. And I said to the Presi- dent after thinking about it, and I went down to Santa Barbara and we talked, both about my resignation but then about the results of this program. And I believe it oc- curred in the Century Plaza Hotel on a morning. And I said that it seems to me that we ought to try to reorient it to its original purpose. Mr. President, and that is for us to avoid dealing through intermediaries and to talk to Iranians directly, and he agreed with that. And he said convene the NSC-the Secretary of State and Defense- and let's talk it over when we get back. So that is what led me to then do two things- convene a meeting and tentatively ask Ad- miral Poindexter, I believe, to have a meet- ing with the Iranian intermediary set up in London. So with that prelude a meeting was con- vened on December 7 of the NSC, and I would, I believe, have presided because I was still sitting in the chair. What I am saying now is based upon routine and not notes from it. But I always started off by briefing the issue. Here we are today con- vened to talk about the Iranian program. Here is what has happened since the be- ginning and here is the return, the benefits and the liabilities of it, and the decision is what should we do or what should we do henceforth-continue as we have, change, or something else. And then invite the comments of every- body around the table, usually start with the Secretary of State, then the Secretary of Defense, and around the table, and that would have led to the Director of the CIA, and any one of the other ad hoc members that happened to be present. Usually it was Mr. Regan. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 And it was unanimous in the meeting that this really had gone badly off course and that we should yes, still be open to talking to Iranian officials, authorities, and have a concrete political agenda to describe. And we talked a little bit about that-our view of our interests in the area, how they were threatened by Iran, disagreements we had with them over terrorism and fundamental- ists' crusade in the Middle East, and ulti- mately perhaps even some common inter- est-Afghanistan and elsewhere. But because of how things had gone up until then we ought to also tell them that we were not going to transfer U.S. weap- ons, sell U.S. weapons. We were not going to allow or encourage anybody else to do so. And I don't recall anybody disagreeing with that at all. The President wasn't terribly-didn't inter- vene in the meeting, as I recall, very much on one side or the other, but at the end said well, okay. That's what you should say. And I left that evening and was in London the next morning, and we took off from there. (McFarlane (2) 45-47) Regan's recollection is somewhat different. He recalled that, although McMahan, for exam- ple, was informally dressed, the December meeting got to be more formal because McMahon, among others, raised the question of, you know, what the hell are we doing here. Arms are being sent. Where is the formal authority? You know, what are we doing here? Is this going to be policy? And as a result of that meeting and people expressing views which now are commonly known, such as State Department and De- fense opposed to this. CIA was in favor. NSC was in favor. And I must say that I fa- vored it. I won't deny that I favored keep- ing the channel open, if necessary selling a modest amount of arms, in order to make certain that we were having contacts with Iran and at the same time, if as a result of this they could influence the Hizballah, as they had in the case of Benjamin Weir, why not. So I am not certain, but I think I probably also reflect for the most part the Presi- dent's view on that. (Regan 14-15) John McMahon, who represented the CIA, recalled that [t]here was no decision. We didn't walk away with any marching orders or any de- cision at that moment." The President asked questions about strengthening moderates in Iran by selling weapons. McMahon "pointed out that we had no knowledge of any moder- ates in Iran, that most of the moderates had been slaughtered when Khomeini took over." U. McMahon 11-12) He noted that any weap- ons sold "would end up in the front, and that would be to the detriment of the Iran-Iraq bal- ance." (Id. at 12) He did not know that McFar- lane was about to leave for London. (Id.) After the meeting, McFarlane went to London, where he joined North. North had traveled on December 6 to meet Kimche, Secord, and Schwimmer "to review all the ar- rangements" in connection with the plan North set forth in his note to Poindexter of December 4. (North PROF note to Poindexter, 12/4/85, 02:02:55) On December 8, before meeting with Ghorbanifar, and Nimrodi, McFarlane privately reported his instructions to Kimche. Kimche was upset and he said: I think you're miss- ing a big opportunity; that you have to have some patience; that these movements take time to consolidate; and these people are delivering to us important items, infor- mation basically; and that we see signs from our intelligence that they're making headway and beginning to lock up and arrest radical elements and put their own people in more responsible positions, and the gradual evidence of their growing in- fluence and ability to act. And I said: Well, we don't see that; and further, we think it is being skewed off in the wrong direction. So he said: Well, we disagree. And we went ahead and met with this Mr. Ghorbanifar, and in the course of about three hours 11covered my instructions. And he said: Well, I understand the political dialogue, and our people in Iran are very much open to that; and so, the point is Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 that you are misunderstanding how much turmoil there is in Iran. There is quite a lot of conflict between the radical and cen- trist and traditionalist elements there, and it is just not going to succeed in getting my superiors to take much in the way of risk if they don't see that the United States is truly willing to demonstrate the political capital investment to do it. And I said: I understand what you say; my instructions are these, and we are not going to transfer any more arms. Well, we had not and did not, but Israel had.28 In his second interview with the Board, McFarlane provided more detail than in his first: Colonel North was already there, and I went alone, and I may have had-I think I was alone, and was met on arrival by Colo- nel North at Heathrow and we went in to the Hilton Hotel and I asked to get togeth- er with Mr. Kimche. And he said well, we will set that up right away, and we did, I believe, within an hour or so in the Hilton that morning. And I had known him for a long time and then got right to the point and said that this was well-meaning, well-intentioned, but it hasn't turned out and the President has decided that it has to be reoriented very substantially and my instructions are to say that if they are open to dialogue, we are too, and if not so be it, but under no circumstances are we prepared to sell arms nor to allow anybody else to either. And he rejoindered and said he thought that we should have more patience and try to keep this going. 28 The Maximum Version's account of this part of the conver- sation reads: "Mr. McFarlane made clear that a Western dialogue with Iran would be precluded unless Iran was willing to use its influence to achieve the release of Western hostages in Beirut. He also made clear that we could not and would not engage in trading arms for hostages." (Maximum Version at 5) The Historical Chronology account reads: "At this meeting, Mr. McFarlane, as instructed by the President, stated that: . . . -the U.S. could under no circumstances transfer arms to Iran in exchange for hostages." (Historically Chronology at On November 23, 1986, North told the Attorney General, W. Bradford Reynolds, Charles J. Cooper, and John Richardson, that McFarlane told Kimche during these meetings that the transac- tion could not be seen to be an exchange of arms for hostages. (Reynolds notes) (McFarlane (1) 27-28) Chairman Tower: So this was in effect going back to the August approval on our part, or the termination of the August ap- proval? Mr. McFarlane: Yes, sir. Chairman Tower: I'm sorry to interrupt. Go ahead. Mr. McFarlane: And Mr. Kimche said that while he could understand why we were disappointed that this was the nature of things in the Middle East and they couldn't always go as hoped, and we ought to keep going with it. And it was irreconcilable, really, and I said I'm sorry, we just-I have my instructions. And he told me the meet- ing, I think the meeting was for 3:00, I think, 2:00 or 3:00 in the afternoon, and we went on separately to the meeting. And at the meeting, which was in a West End London apartment-and I don't know. I've seen reports that it was Mr. Schwim- mer's apartment. I don't know that first hand. But at the meeting I met with, from the Israeli side, again Mr. Kimche and Mr. Nimrodi. The only Iranian present, to my knowledge, was Mr. Ghorbanifar. And from the American side myself and Colo- nel North. And it was about a three-hour meeting, as I recall. Colonel North was. the notetaker. And I began my brief saying here is our experience or our view of the experience of the past three months or so, and our purposes are these, and they haven't been met, and we think that there has been bad faith on the Iranian side, and it calls into question two fundamentals from our point of view. Number one, is there good faith at all and whether or not there is, is there competence, is there real authority. Can you take decisions and change things? Our conclusions are that we are open to a political dialogue, and I have developed that, to his great dismay, for about an hour. And I said that the President has de- cided that there can be no sale of U.S. weapons nor will we approve the sale by others of weapons. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 And he replied in a kind of a cursory fash- ion, accepting that his superiors in Tehran were in fact interested in changing Iranian policy and forming a government with better relations with the West, but that I had to understand that their vulnerability was quite high and that they needed badly to maintain their own support from within the military and that the coin of that rela- tionship and support and strength within Iran was the weapons. And I listened to him talk for a half hour or so, and just in observing, as any human being does, to evaluate what kind of person this was, and by this time I had also after the Summit gotten a lot more infor- mation about him, but it was mostly from that meeting where it was very apparent that his agenda was buying weapons and his interest in our political agenda very su- perficial. And though he purported or represented that his seniors were interested in that he personally obviously was not conversant with those things and had only a passing interest in them. And after hearing him out I said, well, I understand what you have said. I delivered my instructions. Please convey that to your government. And that's the end of it. And I left and went back briefly to the Hilton to pick up some things and went on out to the airplane and took off. Senator Muskie: Did Ghorbanifar express any concern about the quality of the arms shipment, the HAWKs? Mr. McFarlane: That seems likely, Mr. Sec- retary. I think he complained about a lot of things that were foreign to me, but I think probably he did. Chairman Tower: What kind of representa- tions did he make to you about the people that he was in liaison with in Iran or that he represented? Did he go into the matter of the three lines or factions with you at all in Iran? Or did he talk about one specific faction or group? Mr. McFarlane: We had received intelli- gence on the political map of Tehran, so to speak, from two sources. We in the United States had received from the Israe= lis what they had received from the Irani- ans, and separately Mr. Ghorbanifar trans- ferred to us his own product of intelligence that described, as you say, these three lines of political affiliation that were, call it, radi- cal-center and conservative. But that goes back to August, really, the original product, and in this meeting he did describe that the people with whom he was associated included basically those who were oriented toward a less extreme return to kind of a non-aligned position but normal trade and discourse with the West and retrenchment on this fundamentalist crusade, and recognized the isolation that it was producing, and did however have within it mullahs, some bazaaris and a sub- stantial number of military leaders and people from outside the government like the bazaaris. (McFarlane (2) 48-53) Ghorbanifar provided the Board with his ver- sion of the December meeting. He said the meeting took place at Nimrodi's London home, with Kimche, Schwimmer, McFarlane, North, and Secord. Ghorbanifar described the meeting as an exchange of "tough" lectures. McFarlane gave a lecture that we want to know the importance, strategic point of Iran, we know the people, we know we had bitter relations before, and so on and so on, and we want a better one. I said what are you talking about? You just left a mess behind and you want something else? I was tough. I explained, I explained to him that what is the situation inside Iran between the rival groups, between the poli- ticians, what is this mess, what the hell a problem has brought this one, this issue has presented to this big policy. I told him what the hell is this, what is the problem, you leave a mess behind, and if you want to continue this way, I said, just is better you cut off and don't put us, the blame on us, and by the fire on your side Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 because then there will be fire back on your interests. (Ghorbanifar 122-123) Ghorbanifar also re- membered Nir saying that Ledeen, Schwimmer, Nimrodi, and Kimche no longer would partici- pate in the negotiations or the transaction. (Id. at 120) North returned from London on December 8. The next day, he submitted a memorandum to McFarlane and Poindexter summarizing the results of the London meetings and setting forth a new plan of action. The meetings this weekend with the Israe- lis and Gorbanifahr [sic] were inconclusive. Gorbanifahr refused to return to Geneva with our message that no further deliveries would be undertaken until all the hostages were released. Gorbanifahr and the Israelis both believe that if he were to pass such a message to the Iranian Prime Minister or the Oil Minister (who provides funds for items delivered)-one or more of the hos- tages would be executed. Gorbanifahr noted that nine Hizballah leaders had been summoned to Tehran on Friday [Decem- ber 6] and that, given the pressures inside Lebanon, all it would take for the hostages to be killed would be for Tehran to "stop saying no." Much of what we decide to do in the days ahead depends upon whether or not we can trust Gorbanifahr. The Israelis believe him to be genuine. Gorbanifahr's earlier game plan delivered Reverend Weir. He has proposed that we "deliver something" so that he can retain credibility with the regime in Tehran. He even suggested that the weapons delivered be useful only to the Army or Air Force (not the Revolution- ary Guards) and that they be "technically disabled." He urged that, if improved HAWKs were not feasible, to at least keep the door open by some kind of delivery be- tween now and the end of the week. He said we must recognize that if TOWs are provided that they will probably go to the Revolutionary Guards. The Israelis have willingly consented to "kick-back" arrangement which allows Is- raeli control over Gorbanifahr and Ayatol- lah Karami. Israel believes strongly in using any means to bridge into Iran. Their last three governments over a four year period have been consistent in this theme. Whether we trust Gorbanifahr or not, he is irrefutably the deepest penetration we have yet achieved into the current Iranian Gov- ernment. There is nothing in any of the [tailored intelligence reporting] which con- tradicts what he has told us or the Israelis over the past several months. Much of our ability to influence the course of events in achieving a more moderate Iranian Gov- ernment depends on the validity of what Gorbanifahr has told us-and his credibil- ity as one who can "deliver" on what the Iranians need. While it is possible that Gorbanifahr is doubling us or simply lining his own pockets, we have relatively little to lose in meeting his proposal; i.e., the Israe- lis start delivering TOWs and no hostages are recovered. On the other hand, a supply operation now could very well trigger re- sults he claims. The current situation is one in which infor- mation is incomplete, the motivation of the various participants uncertain, and our operational control tenuous in that we have had to deal exclusively through the Israelis. The near term risk to the hostages has undoubtedly been increased by Iranian "expectations" arising from earlier deci- sions to proceed with deliveries and by the increasing pressure against Hizballah in Lebanon. Terry Waite, our only access to events in Lebanon, readily admits that his influence is marginal at best. Waite shares our belief that the hostages are increasing- ly endangered and that one or more of them could well be executed by the end of the week. Our greatest liability throughout has been lack of operational control over transac- tions with Gorbanifahr. The Israeli contact, Schwimmer, has arranged deliveries of items which were not requested by Gor- banifahr for the Iranian military. Further, the terms which he negotiated are disad- vantageous to the IDF and our ability to replenish the Israelis. It was apparent, during the meeting with McFarlane, that Gorbanifahr preferred to deliver only items Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 useful to the Iranian military-not the Rev- olutionary Guard. Despite admonishments to the contrary, Schwimmer had already ar- ranged for the 3,300 TOWs as part of the next steps. Schwimmer's arrangements would have ex- changed the 3,300 TOWs for three hos- tages at a price which would not allow the IDF to recoup expenses, thus complicating our ability to replenish IDF stores. In short, most of the problems with this en- deavor have arisen because we have been unable to exercise operational control over arrangements or their expected outcome. For example, at the meeting with McFar- lane we learned for the first time that the Iranians want desperately to return the 18 basic HAWK missiles which are still in Tehran. All agree that we should only do so if the in-bound aircraft has something aboard which the Iranians want. At the end of the meeting it was agreed that we would "get back" to Gorbanifahr quickly as to our next steps. He departed for Geneva to brief the Iranian Oil Minister to the effect that "technical difficulties. remain to be overcome before further deliveries can be scheduled." The question which now must be asked is should we take a relatively small risk by al- lowing (encouraging) a small Israeli-origi- nated delivery of TOWs and hope for the best or should we do nothing? If such a delivery were to take place, we would have to plan to replenish the Israeli stocks on a "routine" basis to avoid drawing attention. If we are to prevent the death or more of the hostages in the near future, we appear to have four options available: Accept Gorbanifahr/Schwimmer's game plan: -Stretch any replenishment to Israel over several months making it routine. -1,100 TOWs are maximum risk ma- terielly [sic]. Cost and cover can be maintained by selling from stock to Israel over time. -If hostages are recovered disclosure doesn't hurt much. Raid and attempt rescue: -If this option is pursued, then the military should be directed to execute by NLT next Saturday and talks with Gorbanifahr should be resumed. in effort to hold Hizballah in check over the next 6 days. Allow the Israelis to deliver 400-500 TOWs while picking up 18 HAWKs in effort to show good faith to both factions in Iran: -This could cause Iran to deliver a hostage as sign of cooperation. It will also serve to boost Gorbanifahr's rep- utation. -Israel could do this unilaterally and seek routine replacements. -This gives U.S. more breathing time (maybe!). Do nothing: -Very dangerous since U. S. has, in fact, pursued earlier Presidential decision to play along with Gorbanifahr's plan. U.S. reversal now in mid-stream could ignite Iranian fire-hostages would be our minimum losses. There is a fifth option which has not yet been discussed. We could, with an appro- priate covert action Finding commence de- liveries ourselves, using Secord as our con- duit to control Gorbanifahr and delivery operations. This proposal has considerable merit in that we will reduce our vulnerabil- ities in the replenishment of Israeli stocks and can provide items like the Improved HAWK (PIP II) which the Iranian Air Force wants and the Israelis do not have. Finally, Secord can arrange for third coun- try nationals to conduct a survey of ground and air military requirements which is what Gorbanifahr has been attempting to obtain from the Israelis for nearly three months. (North to McFarlane/Poindexter, 12/9/85) McFarlane reported to the President, the Secretary of Defense, the Director of Central Intelligence, Regan, and Poindexter on Decem- ber 10. (Jones to Stephens, 1/24/87 (Presiden- tial calendar); DC1 to DDCI, 12/10/85) On his way to the NATO Ministerial Meeting in Brus- sels, the Secretary of State received a report of Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 the meeting: "White House meeting this morn- ing. The turn-off is complete (we think). McFarlane turned down in London. Ollie did paper saying this means hostages will die." (Shultz, SRB, 34) The President told the Board on January 26, 1987, that McFarlane expressed no confidence in the Iranian intermediary he met in London (Ghorbanifar). The President said McFarlane recommended rejection of the latest Iranian plan. The President said he agreed. "I had to." In a memorandum, dated December 10, 1985, the Director of Central Intelligence noted that McFarlane did not have a good impression of Gorban- ifehr [sic] and recommended that we not pursue the proposed relationship with him. He recommended that we pursue the rela- tionship with others representing the mod- erate forces in the Iranian government, talking and listening to them on a purely intelligence basis but being alert to any action that might influence events in Iran. 2. Everybody supported this in our round- table discussion. Other options which Bud had suggested were to let the Israelis go ahead doing what they would probably do anyway, and hope we get some benefit, or to mount a rescue effort. The President argued mildly for letting the operation go ahead without any commitments from us except that we should ultimately fill up the Israeli pipeline in any event, or the Con- gress will do it for us. He was afraid that terminating the ongoing discussions, as Bud had speculated they might, could lead to early action against the hostages. The trend of the succession of this was that it was a little disingenuous and would still bear the onus of having traded with the captors and provide an incentive for them to do some more kidnapping, which was the main burden of the argument against going forward on the program. The Presi- dent felt that any ongoing contact would be justified and any charges that might be made later could be met and justified as an effort to influence future events in Iran. I did point out that there was historical precedent for this and that was always the rationale the Israelis had given us for their providing arms to Iran. . . . 4. As the meeting broke up, I had the idea that the President had not entirely given up on encouraging the Israelis to carry on with the Iranians. I suspect he would be willing to run the risk and take the heat in the future if this will lead to springing the hostages. It appears that Bud has the action. (Casey to DDCI, 12/10/85) In his first interview with the Board, McFar- lane remembered that the meeting occurred on December 11, and that the Vice President and John McMahon (for the Director of Central In- telligence) attended. I debriefed that I had carried out my in- structions and came home. But I added, I said: Whatever may be the case in Iran, this fellow is a person of no integrity and I would not do any more business with him, the Iranian Ghorbanifar. And I left the government believing that it was discontin- ued. (McFarlane (1) 28) In his second interview, McFarlane added: I believe, unlike the preparatory meeting on the seventh, this time Mr. Casey was there but the Secretary of State was not. And Mr. Regan and the Secretary of De- fense I recall specifically sitting opposite me in the Oval Office. And it was a short meeting, I think probably fifteen or twenty minutes, and I stated basically that I had carried out the instructions, that I had made the two points, and went through the specific content of our political agenda that we were prepared to talk about, and the second point on the unwillingness from our side to sell arms or authorize anybody else to do so, and that they acknowledged that they were prepared for this political dialogue but that it was unrealistic to assume that it could occur or make any headway without weapons, and that at that impasse the talks were broken off. And then separately I provided kind of a commentary on my evaluation of Mr. Ghorbanifar, which was that he was not a Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 trustworthy person and had a very differ- ent agenda from our own and was an un- satisfactory intermediary. And finally I be- lieve I also said that it is conceivable some day that our original point, the political dialogue, they may come back to you on. I doubt it, but I recommend that you have nothing further to do with this person nor with these arms transfers. And the President was rather pensive. At that point the Secretary of Defense kind of assertively made the point. He said, I agree with Bud that this program is a very ill-ad- vised program and that we should have nothing further to do with it, and the President was still kind of reflective, nod- ding but not saying anything, as I recall it. I think Mr. Casey was essentially passive but listening and said well, so be it or something accepting that kind of emerging consensus. And that was the end of it. General Scowcroft: In other words, you think what you said is let's stop this pro- gram and if the dialogue is going to come maybe they will get back to us, but clear termination of the program? Mr. McFarlane: Yes, it is, General, and I say that not only because I believe that was my reaction to the three months' experi- ence of it but because as a practical matter I was leaving the government and I had real misgivings about this thing going on at all afterwards. General Scowcroft: Do you remember Ollie North saying to you or writing a memo or anything saying this means the hostages will die? Mr. McFarlane: No, I don't. Senator Muskie: Or Ghorbanifar? Mr. McFarlane: I hadn't thought about that, Mr. Secretary, although he was given to extravagant kinds of things. It wouldn't surprise me if he said that. [The President] was, however, of a mood that was not uncommon when he was un- comfortable with the situation, when in this case everyone else in the room seemed to be of one view and he didn't want to oppose that view. I don't recall his having been emphatic about an opposing point of view. The President was always very hopeful, op- timistic and on almost every issue, and I think on this one on that day, was disap- pointed that he hadn't turned out so far, but always looking for the bright side or the possibility that it could be salvaged. But concretely did he say anything by way of decision? I don't believe so. And I drew my conclusion that well, Mr. Regan did say he agreed that it ought to be closed out, as I recall. I would characterize it as a recommenda- tion on my part that there should be noth- ing more to do with this person, Ghorbani- far, that there be no further arms shipped whatsoever by anyone, that in my judg- ment that would lead to a complete discon- tinuation of any exchanges, finally that I could imagine someday they might come back and say all right, without any arms in- volved we are open to your political agenda, but that concretely don't do busi- ness with that person and don't sell any arms. Chairman Tower: Well, was the suggestion that if there was to be a reopening of this that it would come from them? Mr. McFarlane: That's right. (McFarlane (2) 55-58) Regan recalled that, right after [McFarlane's] return there was a meeting with the President, and I believe Shultz, Weinberger and Casey were present, to discuss what further should be done. Bud led me to believe that this con- tact, while it wasn't as good as they had originally hoped and that it wasn't as pro- ductive a contact as they had hoped, and we weren't getting any hostages out, we weren't really meeting with the top side of the Iranian government. And, accordingly, something different had to be tried. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The NSC were trying to make contacts through Ghorbanifar directly to a higher level within Iran. They were trying to es- tablish better relations than just the people with whom they were meeting in Europe. This is one of the things that McFarlane brought back from his meeting. . . . [De- spite his negative impression of Ghorbani- far, McFarlane stated] that we could and should make contacts at a different level, at a better level than Ghorbanifar. [T]he President urged that, as a matter of fact, that we try something else or abandon the whole project, because he wanted to keep it open not only for geopolitical rea- sons but also the fact that we weren't get- ting anywhere in getting .more hostages out. And we were going to spend another Christmas with hostages there, and he is looking powerless and inept as President because he's unable to do anything to get the hostages out. (Regan 15, 31-32, 17) Weinberger did not re- member this meeting. (Weinberger 14) F. The NSC Staff, the CIA, and Ghorbanifar: December 1985 January 1986 Some ten days after this meeting, Ghorbani- far visited Washington. (Ledeen (1) 7) 29 Ghor- banifar's visit was one of a number of meetings and conversations in December 1985 about which little is known. Early in the month, Ledeen told Clarridge and Charles Allen that he had important intelligence about Iranian- backed terrorism in Western Europe. He pro- vided Ghorbanifar's name and telephone num- bers to Allen, and said he had McFarlane's ap- proval to pursue the matter. He told Allen Kimche was involved. (C. Allen 10; CIA/IG Chronology 11) The Director of Central Intelli- gence met Ledeen on December 19. On De- 29 According to the NSC "Chronology of Events: U.S.-Iran Dia- logue," dated 11/20/86, Ghorbanifar came to the United States on December 22 for meetings with American officials. This date is consistent with a suggestion in a memorandum from the Chief of the CIA's Near East Directorate to the Director of Central In- telligence. See pp. et seq. infra. Ghorbanifar told the Board only that he visited Washington in December 1985. (Ghorbanifar 127) cember 22 and 23, Ledeen and Ghorbanifar met the Chief of the CIA's Iran desk. According to the CIA's report of the meeting Ledeen met this. official alone, and reviewed his relationship with Ghorbanifar. He said about a year ago, he (Ledeen) had gone to the former National Security Advi- sor Robert McFarlane to discuss the need for an Iran policy. Ledeen suggested to McFarlane that he be authorized to contact the Israeli Government to see what could be done in conjunction with them. McFar- lane authorized this contact and shortly thereafter Ledeen met Prime Minister Peres. Ledeen added that Peres was very enthusiastic about working with Ledeen and the U.S. Government on the Iranian problem and told him about their contact with Subject [Ghorbanifar]. Two Israeli of- ficials, David Kimche and Jacob Nimradi [sic], introduced Ledeen to Subject. Since then, he has seen Subject 20-30 times, often in conjunction with Kimche and Nim- radi. It was from this contact that the oper- ation developed to have the Israelis at our behest deliver to Iran 500 Tow [sic] mis- siles and, more recently, 18 Hawk missiles in exchange for the release of all the hos- tages held in Lebanon. Ledeen is con- vinced that the release of Reverend Weir was tied directly to the first shipment of missiles. Ledeen went on to say, however, that he never really expected the Iranians to deliver all the hostages given the "Irani- an's merchant mentality." -The delivery of the Hawk missiles has been an operational nightmare. There was a misunderstanding about the type of missiles the Iranians were seeking. They wanted a missile that could hit a target at seventy-thousand feet and already had Hawk missiles in their arsenal. What they thought they were going to get was a modified and advanced version of the Hawk. They are quite angry about the delivery of the missiles and have asked that they be removed from Iran as soon as pos- sible. Their presence in Iran is politi- cally troublesome to the Iranian hier- ___ Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 archy. They are now asking for Hercu- les or Phoenix missiles. -Ledeen stated that at a recent high- level meeting which included the President, Secretary of State Schultz [sic] and Defense Secretary Weinberg- er a decision was made not to proceed with Ghorbanifar in an effort to re- lease the hostages. Schultz and Wein- berger reportedly were quite unhappy about this operation. -As an aside, Ledeen noted they had purposely overcharged the Iranians and had used around $200,000 of these funds to support Subject's politi- cal contacts inside Iran. Later that same evening, Subject stated he was holding $40 million which the Iranians want returned. -Ledeen is a fan of Subject and de- scribes him as a "wonderful man .... [sic] almost too good to be true." He had asked Subject to come to the U.S. to meet with us in order to straighten out his credibility and to find a way to keep the relationship going with him. The number one item in this latter area is his proposed Libyan operation. Ledeen said that when he learned of our Burn Notice on Subject, he con- tacted him in an effort to have him ex- plain situation (see Attachment A). He commented that Subject admitted lying to us, saying he could not reveal his source nor explain his relationship with senior Iranian officials. He felt we would not understand his relationship with the Iranian government. We sug- gested that perhaps a new polygraph would be useful given these latest rev- elations. He agreed to a polygraph to be conducted in the Hqs area on 6 January. -In closing out this session, Ledeen made the point that any serious covert action operations directed against Iran using Ghorbanifar should be run out of the White House not CIA because "it will leak from Congress." (Chief, NESA, to DCI, n.d.) The meeting continued at 9 p.m. at Ledeen's house, with Ghorbanifar. Ghorbanifar discussed a three-man "Iranian hit team," operating in Europe with instructions to assassinate a number of Iranian ex-patriots. On December 23, Ghorbanifar again met the CIA official, and named his source about the assassins. This name provoked the comment: This is the same source who provided the false in- formation last March concerning an alleged Ira- nian plan to assassinate Presidential candidates which did not hold up during Subject's poly- graph. (Comment: Subject's reporting on this team [Iranian hit team] is very reminiscent of his previous terrorist reporting which, after investigation and polygraph, turned out to be fabricated. It is our feeling there are bits of valid information in Subject's reporting but he has embellished and pro- jected his own feelings in presenting this information as hard fact. This has been a presistant [sic] problem throughout the four years we have known him. His report- ing has sometimes been useful but it is ex- tremely difficult to separate the good from the bad information. It is hard to find in the file any instance where his reporting in fact resulted in a solid development.) (Id.) The Chief of the Near East Division in CIA's Operations Directorate later said of him: "This is a guy who lies with zest." (C/NE (1) 48) Ghorbanifar used the rest of the interview to discuss Iranian politics-he described political groupings as "Lines." He also provided infor- mation on Islamic Jihad, which preliminarily did not appear useful to the CIA, and his relations with Iranian leaders, especially an official in the Prime Minister's office. (Chief, NESA, to DCI, n.d.) -Subject said that because of the ne- gotiations concerning the exchange of the hostages for missiles, there has not been a terrorist act directed against the USG since July. He implied that this might change now that the negoti- ations have broken off. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 (Id.) Ghorbanifar, supported by Ledeen, then proposed a "sting" operation against Qadha- fi-accepting $10 million to stage the disap- pearance of the Libyan opposition leader, al- Mugarieff. Ghorbanifar planned to travel to London on December 24; he agreed to return for a poly- graph test on January 5 or 6. The interview ended when, at 11 p.m., North "dropped by to say hello to Subject and to talk with him about the problem of retrieving the missiles from Iran. We departed at 2400 hours and it was ar- ranged to get together on the afternoon of 23 December to discuss further some of his ideas." (Id.) On December 23, North met Ledeen at the Madison Hotel at 2:30 p.m., (North calendar), where Ghorbanifar was staying under the alias Nicholas Kralis. (Chief, NESA, to DCI, n.d.) At 3:45 p.m. on the 23rd, North met Secord at the Hay Adams Hotel. (North calendar) Also on December 23, the Director of Central Intelli- gence sent the President a memorandum, in- cluding as the fifth paragraph: The Iranian Gorbanifar [sic], who the NSC staff believes arranged to release Weir, turned up in Washington over the week- end. Ollie North put him in touch with us. He has 3 or 4 scenarios he would like to play out. He gave us information about 3 Iranians going into Hamburg as a hit team. We have verified their movement but not their purpose. It could be a deception to impress us. It is necessary to be careful in talking with Gorbanifar. Still, when our man talked to him on Saturday and asked him if he would take another polygraph he said he would. We think this is worth doing for what we might learn. We want to prepare thoroughly for polygraphing him and because he is going to Switzerland for Christmas, it is understood that he will return here in a week or so for further dis- cussions and for a polygraph. (Casey to President, 12/23/86) Finally, Charles Allen told the Board that he understood that Nir came to Washington in December, and North briefed him on Decem- ber 23 "on this initiative"-that is, on the pro- gram in light of McFarlane's meetings in London. (C. Allen 53) In late December, Allen gave the NSC staff a copy of an August 1984 CIA "burn notice" on Ghorbanifar to the effect that he was a fabricator whose information should not be trusted. (CIA/IG Report 19) On December 24, North met Gen. Uri Simhoni and Col. Moshe Zur, (North calendar), whom his secretary described to Allen and Bernard Ma- kowka as "Israeli intelligence." (CIA/IG Chro- nology 12) Ghorbanifar took a polygraph test in the afternoon and evening, January 11, 1986 and showed deception on almost all of the ques- tions. (Memorandum for the Record, "Ghor- banifar Polygraph Examination") 30 One report on the test stated: He showed deception on virtually all of the relevant questions. He has lied/fabricated his information on terrorist activities and tried to mislead us concerning his relation- ship with the Farsi line inside Iran. He also has distorted [name deleted] role in Islam- ic Jihad. Moreover, Ghorbanifar was tested on his involvement in the deal to release the hostages. The test indicated that he knew ahead of time that the hostages would not be released and deliberately tried to decieve us both independently and with "B". Ghorbanifar provided new information concerning an alleged terrorist plan to attack U. S. interests in Saudi Arabia. He was also tested on this information and was shown to be lying. It seemed clear from Ghorbanifar's behav- ior that he realized that the polygraph test indicated deception. While he commented during the test that he was comfortable with all of the test questions, he said that perhaps the machine might indicate some problems on a series of questions concern- ing Farsi and the rightists inside Iran. He said he had been told by "White House representatives" not to discuss this topic with CIA because the operation was "too far advanced" and if CIA were involved "it would require Congressional briefings." He went on to add that he supposedly ex- pended $800,000 of his own funds for this so George Cave and C/NE/I told the Board that Cave pre- pared the questions for the examination. (Cave 3-5; C/NE (2) 76) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 purpose and has been assured by these "White House representatives" that he will be reimbursed for these expenditures. (Comment: The polygraph operator stated that Ghorbanifar's explanation/rationaliza- tion would not influence the test results on the questions being asked in connection with Farsi and his supporters). In discussing the hostage deal, Ghorbani- far stated he was very comfortable with the questions asked. During one of the breaks in the testing, he commented that the Is- raelis received $24 million as soon as the shipment was delivered and they are hold- ing all of the funds that the Iranians are requesting be returned. He added that the Israelis told him that they had "doubled" the cost of the shipment apparently be- cause the Americans were involved. He said the Iranians were very upset about the last shipment and might resort to terrorist activities against U. S. interests. He re- marked the Iranians have been refraining from these terrorist activities since the ne- gotiations began. Ghorbanifar is clearly a fabricator and wheeler-dealer who has undertaken activi- ties prejudicial to U. S. interests. Neither Ghorbanifar nor Ledeen have [sic] been advised about the results of the test. Michael Ledeen asked that he be informed about the results of the test as soon as pos- sible. He was called on the morning of 12 January and told that the polygraph opera- tor will be reviewing the results on Sunday [January 12] and we should have feedback about the test on 13 January. (Id.) A paper entitled "Comments on Ghorbani- far's Polygraph" noted, in part, that he (a) Lied/fabricated his information on ter- rorist activities; (b) Tried to mislead us concerning his re- lationship with the "rightist line inside Iran"; (c) He distorted the leadership role of Seyyed Mohammad Khatemi inside Islamic Jihad; (d) He showed deception on the question of whether he was under the control of the Iranian Government. The test also indicated Ghorbanifar knew ahead of time that the hostages would not be released despite our providing missiles to the Iranians. He deliberately tried to de- ceive us on this issue both independently and with the collusion of "B". ("Comments on Ghorbanifar's Polygraph") The polygraph examiner reported, on Janu- ary 13, 1986, to the effect that Ghorbanifar was indeed a fabricator of evidence. He noted, moreover, that polygraph examinations in March and June 1984 had produced the same conclusion. On January 11, 1986, Ghorbanifar was tested in "a local hotel" in Washington. "The english [sic] language was used." "De- ception indicated to thirteen of the fifteen rele- vant questions. Inconclusive to the remaining two." Some "relevant" questions, answers, and tracings by the polygraph were: A. Has IDEN C . . . personally told you he is willing to cooperate with "US" intelli- gence? ANSWER: Yes. B. Are you trying to deceive us about IDEN C's actual degree of influence with IDEN E [Islamic Jihad]? ANSWER: No. Testing showed deception to question B. Question A is inconclusive due to inconsistent reactions. Ghorbanifar was questioned about his knowl- edge of Iranian terrorist activities. "Relevant" questions and answers were: C. Are you trying to decieve us in any way about the source of the information re- garding the three-man team (the IDEN G [Hamad Hassani] three-man hit team)? ANSWER: No. D. Regarding European-based IDEN B [Iran/Iranian] terrorist, have you deliber- ately fabricated any of the information you have provided? ANSWER: No. E. Did IDEN F . . . tell you the Hamburg Team (The IDEN G three-man hit team) killed IDEN L [Aziz Muradi]? ANSWER: Yes. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 F. Other than what you have told us, are you aware of ongoing plans targeting "US" persons or interests for acts of terrorism you are not telling us about? ANSWER: No. Testing showed deception to questions C, D, E, and F. The test produced similar results when Ghorbanifar was questioned about "'new' in- formation about terrorist's current plans target- ed against `USG'. While discussing this topic, `G' was occasionally evasive and often reluctant to answer questions." He also contradicted himself, although he did outline a meeting, during which IDEN C asked an Iranian for 300 kilograms of plastic explosive to use against United States facilities in Saudi Arabia, and a Lebanese Palestinian Shiite terrorist asked for more efficient Iranian logistical support in de- livering $6,000,000 worth of terrorist arma- ments. ("Polygraph" Division to C/NE/IRAN, 1/13/86) At the request of the Director of Central In- telligence, Charles Allen interviewed Ghorbani- far for five hours on January 13, 1986. This conversation generated a nine-page report. Di- rector Casey wanted, Allen reported, "to obtain a general overview of the information he pos- sesses, not to conduct a detailed debriefing." (C. Allen, "Interview with Subject [Ghorbani- far]," 1/29/86) Ghorbanifar sought a "more principled" relationship with the CIA, based on his usefulness as "a turn-key project man," rather than an employee. He explained that, when, in 1980-82 the CIA had communicated its mistrust of him to other intelligence agen- cies, he had retaliated. Ghorbanifar had per- suaded individuals whom he could influence not to cooperate with the CIA. (Id. at 1-2) Ghorbanifar explained his present goal was the modification of the Khomeini regime and the alignment of Iran with the West. Subject [Ghorbanifar] stated that he wished to work with the US Government and CIA in a number of areas. Clearly, the US hostages held in Lebanon were a high priority. He would continue to work with the White House on this issue; this effort would be kept separate. A second area would be to assist the West in blunting Ira- nian terrorism. A third area would be working with the Agency to thwart Libyan and Syrian-sponsored terrorism and to assist in the overthrow of Libyan leader Qadhafi. (Id. at 2) With regard to the hostages, Ghorbanifar made three points. High Iranian officials were interested in a new relationship with the United States. They could release, or kill, the hostages. Whether the United States pursued a relation- ship with Iran would decide the hostages' fate. If the United States missed the opportunity, the hostages would be killed and new terrorist acts would occur. Ghorbanifar's Tehran contact, Prime Minister Mir Hosein Musavi-Khamenei, and Minister of Oil Gholam Reza Aqazadeh "'will lose face' soon" unless the United States went forward with arms supplies through Israel. These men told President Ali Khameini that the United States was willing to provide advanced weapons "in return for Tehran's promise to secure the release of US hostages held in Lebanon. They had assured other senior officials that a long- term relationship with the United States was possible and in negotiation; as a result, Iranian terrorist attacks against the United States had ceased for seven months. "Subject stated that `the Islamic Jihad Organization (IJO)' would strike soon unless a new understanding was reached, perhaps as early as 24 January." (Id.) Subject stated that he had convinced the Prime Minister and the Minister of Oil to trust the United States with Israel acting as an intermediary. Iran had shown "good faith" by paying in advance of arms deliv- eries in November. When the goods (Hawk surface-to-air missiles) arrived in late No- vember, they were an "old model", costing four times the price "originally" agreed upon. The Hawk missiles are still at Tehran International Airport, awaiting pickup for return to the West. The Prime Minister and others believe they "were cheated." In fact, nine of the 18 Hawks have the Star of David inscribed on them. Subject stated that he has told the Prime Minister that, unless agreement with the United States is reached by 24 January, he would no longer wish to serve as an inter- mediary in dealing with the United States. 8. As far as his personal situation was con- cerned, Subject expressed no serious con- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 cern. Musavi-Khamenei, . . . and Aqazadeh all owe Subject substantial sums of money. [His Tehran contact], moreover, has been photographed in compromising situations with Western women, an activity that would finish him with the Khomeini funda- mentalist government were it to become known. Even though all three individuals are identified with Line Two [fundamental- ist faction] and have blood on their hands, he has no fear of them. What concerns Subject is that, if talks break down with the United States, widespread terrorist activity will ensue. (Id. at 2-3) Ghorbanifar said the Prime Minister was willing to accept American military assist- ance, including advice and an unofficial pres- ence in Tehran, but had been dismayed by the "cheating thing". (Id. at 3) Originally, the five American and two Jewish hostages were to have been released in connection with the ship- ment of HAWKs. Now, Ghorbanifar said, a "terrorist war" was possible. Shiite terrorism in Pakistan, which would prove worrisome to the United States, was likely. He added that the "Iranian Revolutionary Guard Corps (IRGC) can exert control over the Shiite captors of-the Americans. All that is required for the Ameri- cans to be freed is for Prime Minister Musavi- Khamenei to issue an order and the IRGC will secure their release." (Id.) Conversely, the three Iranian officials could ensure the death of the hostages if there were no agreement with the United States. Ghorbanifar feared the Sovi- ets might exploit Iranian factionalism; the second highest official in the Foreign Ministry was pro-Soviet. Ghorbanifar gave a long exposition on his links with Qadhafi's regime and ability to carry out a "scam" by faking the murder of Margar- ieff, one of Qadhafi's targets; his sources of in- formation regarding Iranian terrorism; his in- formation about Syrian officials, who with the Polish government, supplied weapons to Irani- an terrorist networks; and his knowledge of IRGC-particularly those plotting a coup de main against Bahrain. Characterizing Ghorbanifar, Allen wrote that he is a highly energetic, excitable individual who possesses an extraordinarily strong ego that must be carefully fed. Intelligent and clearly an individual who has made a considerable amount of money in procure- ment of arms and in provision of "other services", he is relatively straight forward about what he hopes to get out of any ar- rangement with the United States. He deeply resents "his treatment" by the Agency-in the 1980-82 timeframe and fre- quently speaks scornfully of a woman with the name "Lucy" from the US Embassy in London who met with him at that time. A personable individual, he also consistently speaks of his love of Iran and the need to change the composition of the current gov- ernment there. It is difficult to gauge just what Subject's "organization" consist [sic] of but he appears to have influence over or business arrangements with a substantial number of individuals in the Middle East and Europe and inside Iran itself. We have hard evidence that he is close to the Prime Minister, the Minister of Oil, and other senior officials like an official in the Prime Minister's office. There is no question, however, that he exaggerates and inflates for his own reasons some [?of these?] rela- tionships. He is impatient if one tries to pin him down on the specifics of some of the complex plots that he describes. For this reason, the best strategy is to go back over details in a series of meetings so that all aspects of the plot can be determined. This indirect approach takes time but builds rapport with Subject. The worst ap- proach to Subject would be to attempt to lecture him. (Id. at 8-9. Copies to: DCI, DDCI, DDO, DDI, DC/NE, O/DDO (Clarridge)) At Ghorbanifar's request, on January 23, Allen met a follower of Ayatollah Shirazi, who was visiting the United States. He confirmed Ghorbanifar's connections "in key areas" of the Middle East. (C. Allen, "Meeting with Hojjat ol-Eslam Seyyed Mohsen Khatami," 1/31/86) G. The January 1986 Findings After the December 10 meeting, Poindexter told the Secretary of State on January 5, 1986, the Israelis took action to "revive" the pro- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 gram. Prime Minister Peres' terrorism advisor, Nir, had seen Poindexter, saying Israel would identify Hezballah prisoners held by Lahad [commander of the Chris- tian South Lebanon Army] in southern Lebanon who were not "bloody" and offer to release them and to provide 3,000 TOWs in exchange for the hostages. I [Shultz] said that this idea presented all the same problems as before. It would be a payment that "blows our policy," and Israel would have an interest in leaking such a deal. I remarked at the time, "so it's not dead" and noted that "Peres comes to me on some things and to the NSC on others." I had been told that "Newsweek" had the story of the Kimche-McFarlane meetings, but did not run it. I noted that Kimche may have leaked it deliberately. My impres- sion at the time was that Vice Admiral Poindexter's reaction to Mr. Nir's idea was negative. The reason for all of that is that I felt that one of the things Israel wanted was to get itself into a position where it's arms sales to Iran could not be criticized by us be- cause we were conducting this Operation Staunch and we were trying to persuade everybody not to sell arms. That is what all that is about. (Shultz, SRB, 37) 31 CIA General Counsel Stanley Sporkin contin- ued working on a draft Finding, and on January 3, he carried a copy to North. (CIA/IG Chro- nology 13) His draft offered a choice between notifying Congressional intelligence commit- tees or postponing such notification until the President determined it would be appropriate. (Sporkin 26) North then prepared the neces- sary documents for Poindexter to submit to the President with the proposed Finding. North's draft Finding did not refer to hostage rescue until Sporkin insisted that it do so. (Id. at 22- 23; CIA/IG Chronology 13) The draft Finding 91 North told the Attorney General's team in November 1986 that, in January 1986, Nir suggested that the Israelis transfer funds from an account containing residual funds from the arms transfers to Iran and pay such funds into an account used by the Nicaraguan Contras. (Reynolds notes; Richardson notes) did not include the option of notifying Con- gress. North submitted the package to Poindexter by memorandum dated January 4. North wrote that the Finding was based on our discussions with Nir and my subsequent meeting with CIA General Counsel Stanley Sporkin At Sporkin's request, I talked to Bill Casey on [telephone] re the Finding and the overall approach. He indicated that he thought the finding was good and that this is probably the only approach that will work. He shares our goal of achieving a more moderate government in Iran through this process. (North to Poindexter, Action Memorandum, 1/ 4/86.) The package included a memorandum from Poindexter to the President and a Find- ing, dated January 6.32 ACTION MEMORANDUM FOR THE PRESIDENT FROM: JOHN M. POINDEXTER SUBJECT: Covert Action Finding regard- ing Iran This week, Prime Minister Peres of Israel secretly dispatched his special advisor on terrorism with instructions to propose a plan by which [Israel with limited assist- ance from the U.S.,] 33 can act [in concert] to bring about a more moderate govern- ment in Iran. [The Israelis are very con- cerned that Iran's deteriorating position in the war with Iraq, the potential for further radicalization in Iran, and the possibility of enhanced Soviet influence in the Gulf all pose significant threats to the security of Israel. They believe it is essential that they act to at least preserve a balance of power in the region.] 34 32 North's first draft Finding was dated January 3, 1986. The accompanying memorandum is undated. The changes from the first drafts are indicated below by square brackets. When the changes were material, the original language is reproduced in footnotes. 33 The first draft read: "the U.S. and Israel". 94 The first draft contained the following sentence instead of the two sentences in this version: "The Israelis are obviously very concerned that the course of the Iran-Iraq war and the potential for further radicalization in Iran pose a significant threat to the security of Israel." Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 The Israeli plan is premised on the as- sumption that moderate elements in Iran can come to power if these factions dem- onstrate their credibility in defending Iran against Iraq and in deterring Soviet inter- vention. To achieve the strategic goal of a more moderate Iranian government, the Israelis are prepared to unilaterally com- mence selling military materiel to Western- oriented Iranian factions. It is their belief that by so doing they can achieve a hereto- fore unobtainable penetration of the Irani- an governing heirarchy [sic]. The Israelis are convinced that the Iranians are so des- perate for military materiel, expertise and intelligence that the provision of these re- sources will result in favorable long-term changes in personnel and attitudes within the Iranian government. Further, once the exchange relationship has commenced, a dependency would be established on those who are providing the requisite resources, thus allowing the providor(s) to coercively influence near-term events. [Such an out- come is consistent with our policy objec- tives and would present significant advan- tages for U.S. national interests.] As described by the Prime Minister's emis- sary, the only requirement the Israelis have is an assurance that they will be allowed to purchase U.S. replenishments for the stocks that they sell to Iran. [Since the Is- raeli sales are technically a violation of our Arms Export Control Act embargo for Iran,] a Presidential Covert Action Finding is required in order for us to allow the Is- raeli [transfers to proceed, for our subse- quent replenishment sales to Israel, or for other assistance which may be deemed ap- propriate (e.g., intelligence).] 35 The Covert Action Finding attached at Tab A provides the lattitude [sic] for the trans- actions indicated above to proceed. If this Finding is signed, we would not interfere when the Israelis unilaterally commence sales and deliveries of TOW missiles during January, 1986. [The Finding also au- 35 The first draft contained the following last sentence of this paragraph: "Since the Israeli sales are technically a violation of our Arms Export Control Act embargo for Iran, a Presidential Covert Action Finding is required in order for us to allow the Is- raeli sales to proceed and for our subsequent replenishment sales. thorizes U.S sales of] basic TOWS to Israel when they submit purchase orders for re- plenishing their own stocks. The Iranians have indicated an immediate requirement for 4,000 basic TOW weapons for use in the launchers they already hold. We would be expected to replace the Is- raeli stocks in less than 30 days. 4,000 mis- siles represent [a significant percentage] of all available TOWS in Israel. [The Israelis are sensitive to a strong U.S. desire to free our Beirut hostages and have insisted that the Iranians demonstrate both influence and good intent by an early re- lease of the five Americans. Both sides have agreed that the hostages will be im- mediately released upon commencement of this action.] 36 Prime Minister Peres had his emissary pointedly note that they well understand our position on [not] making concessions to terrorists. They also point out, however, that terrorist groups, move- ments, and organizations are significantly easier to influence through governments than they are by direct approach. In that we have been unable to exercise any sua- sion over Hizballah during the course of nearly two years of kidnappings, this ap- proach through the government of Iran may well be our only way to achieve the re- lease of the Americans held in Beirut. It must again be noted that since this dia- logue with the Iranians began in Septem- ber, Reverend Weir has been released and there have been no Shia terrorist attacks against American or Israeli persons, prop- erty, or interests. The Israelis have asked for our urgent re- sponse to this proposal so that they can plan accordingly. They note that [condi- tions inside both Iran and Lebanon are highly volatile and that] the current crisis in the Middle East provides a rationale for a significant [Israeli] purchase of TOWs and expedited delivery on our part. The Israelis are cognizant that this entire oper- ation will be terminated if the Iranians 36 The original opening sentence read: "The Israelis and the Iranians with whom they are in contact agree that the continued holding of the five American hostages in Beirut will be immedi- ately solved through commencement of this action." Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 abandon their government or allow further acts of terrorism. In order to provide an answer to Prime Minister Peres, the Find- ing at Tab A should be discussed 37 with Secretaries Shultz, Weinberger, Director Casey and Attorney General Meese. [Be- cause of the extreme sensitivity of this project, it is recommended that you exer- cise your constitutional perogative [sic] to withhold notification of the Finding to the Congressional oversight committees until such time that you deem it to be appropri- ate.] 38 The following Finding was attached: I hereby find that the following operation in a foreign country (including all support necessary to such operation) is important to the national security of the United States, and due to its extreme sensitivity and security risks, I determine it is essen- tial to limit prior notice, and direct the Di- rector of Central Intelligence to refrain from reporting this Finding to the Con- gress as provided in Section 501 of the Na- tional Security Act of 1947, as amended, until I otherwise direct. SCOPE Iran DESCRIPTION [Assist selected friendly for- eign liaison services, third countries, which have established relationships with Iranian elements, groups, and individuals] sympa- thetic to U.S. Government interests and which do not conduct or support terrorist actions directed against U.S. persons, property or interests, for the purpose of: (1) establishing a more moderate govern- ment in Iran, and (2) obtaining from them significant intelligence not otherwise ob- tainable, to determine the current Iranian Government's intentions with respect to its neighbors and with respect to terrorist acts, [and (3) furthering the release of the American hostages held in Beirut and pre- venting additional terrorist acts by these groups.] 39 Provide funds, intelligence, 87 The word "privately" appeared here in the first draft. se The original sentence read: "If, based on their input, you decide to proceed, the Finding should be signed and held." sa Point (3) did not appear in the first draft. According to Sporkin, this language was added after a meeting on January 5 between Sporkin, North, and Director Casey at the Director's house. (Sporkin 22-23) counter-intelligence, training, guidance and communications, and other necessary assistance to these elements, groups, indi- viduals, liaison services and third countries in support of these activities. The USG will act to facilitate efforts by third parties and third countries to establish contact with moderate elements within and outside the Government of Iran by providing these elements with arms, equipment and related materiel in order to enhance the credibility of these elements in their effort to achieve a more pro-U.S. government in Iran by demonstrating their ability to obtain requi- site resources to defend their country against Iraq and intervention by the Soviet Union. This support will be discontinued if the U.S. Government learns that these ele- ments have abandoned their goals of mod- erating their government and appropriated the materiel for purposes other than that [sic] provided by this Finding. Regan remembered that Poindexter brought the idea of the Finding and the draft to the President. [E]ither on the way back from the west coast or immediately upon our return from the west coast-I'm not sure which-Poin- dexter told the President that we had had more contacts from the Israelis urging a new line with the Iranians. But he said he wanted to do this in a proper fashion and wanted to have a Finding so that the thing could be put on a regular track and kept moving, if we were going to exploit it. And he brought in a tentative document, a Finding, for the President to sign. There were a few things that had to be changed in that as a result of discussions, and then there was a formal meeting in the first part of January on this subject, an NSPG, a formal meeting. As a result of that, the President decided that we should pursue this line, that we should be prepared to sell arms, and that we should make a Finding that would au- thorize and justify that and that he would sign it. B-60 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 It was discussed with the President, the Vice President and myself on January 6 as, "[h]ere's something." 40 You know how you brief the President 24 hours in advance of this next meeting so when [he] is doing his homework he is familiar with the subject. He was given that piece of paper by John Poindexter at a regular Monday morning meeting, a 9:30 meeting, saying "[t]his is what we're going to discuss tomorrow," and the President signing it for some reason. I don't know. I think it was in error. (Regan 17-18; 22-23) After the President signed this draft, Sporkin reviewed it and, by hand, added the words "and third parties" after "third countries" in the second line of the "Description". (Sporkin 24-25) The Finding was retyped before the President signed it on January 17; Sporkin's addition was the only change. On January 7, 1986, the President and his principal advisors met, apparently after an NSPG meeting that morning, to consider the Iranian project. As the Attorney General de- scribed it: After an NSC meeting or an NSC type meeting in the Situation Room, a few of us were asked to gather in the Oval Office. Now, if you have any information that would vary from or amplify on what I know, do not hesitate to bring up the ques- tions. I am trying to recall from memory. One of the difficulties that I have, and that I suspect others may have, is that I consid- ered this so highly sensitive and classified that I took almost no notes at any time during the thing because I didn't want to reduce anything to paper. I talked with no one about it, up until a certain point, which I will relate. So, therefore, the memory even a year later, is fairly hazy. 40In response to a question, Regan said that he, the President, the Vice President, Poindexter, and Rodney McDaniel, Executive Secretary of the NSC, attended this briefing. According to the Presidential Diary, Fortier, not McDaniel, attended. (Jones to Ste- phens, 1/24/87) Regan remembered this fact, and subsequently corrected himself. (Regan 42) Anyway, on the seventh, I joined with the President, the Vice President, Cap Wein- berger, George Shultz, Don Regan, Bill Casey, John Poindexter, and I was there, and there may have been an assistant to John Poindexter. It may have been Don Fortier. I am not sure. . . . It was not North, to the best of my recollection. . . . Bud wasn't there. . . . At that time, the topic was brought up about an initiative to Iran. It was discussed in some detail, large- ly by John Poindexter, with some participa- tion by Bill Casey. It dealt with some overtures to be made to what were described as more moderate ele- ments within the Iranian Government, and it was related to establishing a relationship so that we would have some influence in the future at whatever time it was possible for the Iranian Government to change, either with the death of the Ayatollah, or what. There was also, as I remember, some dis- cussion that these moderate, these more moderate forces, thought that they might effect a change in the government even sooner than that event happening. They also talked about this being helpful in terms of ending the Iraq-Iran War, trying to get a more reasonable policy where the Iranian Government would be less inclined to participate or support sub- version and terrorism in other countries; and it was also talked about these people using their influence to try to help us get our hostages back. All of these were factors that went into this strategic initiative in regard to Iran. (Meese 3-5) The Attorney General noted that prior events, such as the arms shipments, were not mentioned; nor was he then aware that the President had signed a Finding the previous day. As the discussion ensued, it was the idea that these people wanted a showing of our good faith and that that involved the ship- ment of some limited quantities of arms. They particularly talked about TOW mis- siles, I believe, and that they, in turn, would show their good faith by using their Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 influence to get the prisoners, the hos- tages, back. Again, this is not a precise recollection; but my general recollection is that this was an- ticipated: that it would take place over a fairly short period of time-30 to 60 days-and that that was kind of the general framework of which everybody was think- ing, because they talked about us making available limited quantities of arms, then they would produce hostages as showing that they were really able to do something for us, and that we would then ship more arms if their good faith had been shown by helping us get the hostages. It was kind of a sequence that these events would follow, along with each other. There was also a discussion that, because of the extreme sensitivity, it was recom- mended that the President not inform Congress until we had gotten the hostages back. I vaguely remember there was discus- sion that as soon as we got the hostages, even on our planes en route to Wiesbaden, that we would notify Congress then, before it became public generally. So, the subjects and the discussion of a finding was made at that time, that a find- ing would be necessary because of the way in which this was to be done, with CIA being involved in the transfer of the weap- ons. This was discussed for about an hour and twenty minutes or so. I remember because I consulted back on my calendar, and I had a group waiting for me in the White House Mess that day, and I was late to that lunch- eon by more than an hour. Cap and George were opposed to the idea. I don't remember what the Vice President or Don Regan might have said. Bill Casey was very much in favor of the idea. My own views were that it was a very close decision. I have called it since a "51-49 decision." But I felt, in the long run, that the risks that were attendant to this prob- ably were worth the potential benefit, and the potential benefits to me were both the opening into Iran and also the assistance that would be provided in getting the hos- tages back. . . . It was my independent judgment because nobody had talked to me about it beforehand. But it was also as a result of the discussion back and forth, and particularly Poindexter and Casey were the principal protagonists of going ahead and doing this. . . . There was a relatively thorough-I mean, it was very clear that their [Shultz's and Weinberger's] positions were that they were opposed to it, that George felt this was at odds with our policy in regard to terrorism, that it could hurt us with our allies or with friends around the world. Cap was concerned primarily about the ter- rorism policy. The rejoinder, I think by Poindexter, was that this was a special situation and that this was not at odds with our overall policy; it was an exception to the general situation. I think what most influenced me was the idea that we would be taking-that the risks would be fairly short-term because if it did not work, we would be able to stop it; if this didn't produce results after, say, the first foray, that the thing would be stopped. There was quite a bit of discus- sion about that, that this would be in stages so that it could be stopped. We knew, in retrospect, that it did not work out that way. But that was one of the things that made it, while a close call, more acceptable, as far as I was concerned. (Id. at 6-10) The Attorney General believed that the President had an adequate understanding of the arguments for and against the project. Nobody described the operational details, apart from the arms transfers from the Defense De- partment to the CIA. Ghorbanifar's name was mentioned, but not Khashoggi's or other mid- dlemen's and financiers'. The "thinness" of operational security was not raised. The feeling was that this would not be re- vealed, or at least not be revealed while the hostages were still in jeopardy, and the risks to the people involved was also dis- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 cussed, so it was felt that they would not be revealing this. (Id. at 11) The Attorney General had the im- pression "that the channel would be, sort of, simply from DOD to the CIA to the Israelis." (Id. at 12) The President was confident that the Israelis constituted "a relatively secure chan- nel." (Id.) Nevertheless, the Attorney General remembered, there were always, I won't say questions, but I think that the Iranians were the sort of a sticking point, that we had to try this. out carefully and be cautious as we imple- mented this thing, to be sure that these Iranians would be able to or were sincere and would be willing to show good faith. In other words, I think there was a ques- tionmark left about the Iranians that could only be tested by going through with this thing. (Id. at 13) At his meeting with the Board on January 26, 1987, the President said he approved a convo- luted plan whereby Israel would free 20 Hiz- ballah prisoners, Israel would sell TOW mis- siles to Iran, the five U.S. citizens in Beirut would be freed, and the kidnappings would stop. A draft Covert Action Finding had al- ready been signed by the President the day before. the meeting on January 6, 1986. Mr. Regan told the Board that the draft Finding may have been signed in error. The President did not recall signing the January 6 draft. The President told the Board that he had several times asked Secretary Weinberger for as- surances that shipments to Iran would not alter the military balance with Iraq. He did not indi- cate when this occurred but stated that he re- ceived such assurances. The President also said he was warned by Secretary Shultz that the arms sales would undercut U.S. efforts to dis- courage arms sales by its allies to Iran. The President did not amplify those remarks in his meeting with the Board on February 11. [He did add, however, that no one ever dis- cussed with him the provision of intelligence to Iran.] The Secretary of State also remembered the meeting as occurring in the Oval Office: I again stated my views in full. I recall no discussion about a finding then or at any time thereafter, until it was revealed by Vice Admiral Poindexter in a meeting at the White House on November 10, 1986. I might say that when he read out that finding, I said that's the first I heard of that. Cap, who was sitting across the room from me, said, "I have never heard of it either." I recall no specific decision being made in my presence, though I was well aware of the President's preferred course, and his strong desire to establish better relations with Iran and to save the hostages. So I felt at that meeting that Cap was against it and I was against it and every- body else in the room was in favor. Well, I stated all of the reasons why I felt it was a bad idea, and nobody, in retro- spect, has thought of a reason that I didn't think of. I mean, I think this is all very pre- dictable, including the argument against those who said well, this is all going to be secret or it is all going to be deniable; that that is nonsense. So, all of that was said. And in that January 7 meeting, I know that I not only stated these things, but I was very concerned about it, and I expressed myself as force- fully as I could. That is, I didn't just sort of rattle these arguments off. I was intense. The President knew that. The President was well aware of my views. I think everybody was well aware of my views. It wasn't just saying oh, Mr. President, this is terrible, don't do it. There were reasons given that were spelled out and which are the reasons that you would expect. [N]obody said very much. As I made these arguments, Cap basically agreed with them. He didn't restate them. But I took the initiative as the person in the room who was opposed to what was being pro- posed. I cannot give you a full accounting, but it was clear to me by the time we went out that the President, the Vice President, Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 the Director of Central Intelligence, the Attorney General, the Chief of Staff, the National Security Advisor all had one opin- ion and I had a different one and Cap shared it. The nature of the players the risks when- I would say "when," not "if"-it came for- ward publicly - the description always was that Israel was going to be the conduit, and, therefore, it would be deniable, and we'd just say well, we don't know anything about it, and it's something Israel is doing, and so on. All of this was argued with, that it wouldn't work. (Shultz, SRB, 38, 42-44) Regan's recollection differed. He recalled discussion of Congressional notification at the NSPG meeting. I remember Casey speaking on it and Ed Meese speaking on it at the NSPG on De- cember 7 [sic: January 7], that this should be on a close hold basis . . . and notifica- tion given later to the Congress because there were lives involved where we would be dealing here with hostages and because of the sensitivity of the new contacts we were attempting to establish within Iran being blown if there was premature disclo- sure, that the notification should come later rather than now. the Lebanon-Syria area. Some of these fac- tions probably have our hostages and they can be instrumental in getting those out, and he wants to keep that avenue open. I think [that] is what led him to do it. (Regan 24, 29) In response to a question about the degree of discussion of the risks, Regan noted: The President was told, but by no means was it really teed up for him of what the downside risk would be here as far as American public opinion was concerned. There was no sampling. No one attempted to do this. The NSC certainly didn't in any paper or any discussion say that. I don't believe the State Department in its presentation arguing against this really brought out the sensitivity of this. None of us was aware of that, I regret to say. (Id. at 30) Nor was the President warned that "all hell would break loose" with Congress. (Id. at 31) Regan heard, but disagreed with, the op- ponents of the program. I recognized the validity of what [Secretar- ies Shultz and Weinberger] were saying, you know, that we didn't want to be in a position of trading one for one. Give me a hostage, and to get 100 rifles or whatever the price would be. No, we couldn't be in that. Now why did the President do it? There are two things, I think. First of all, he does have this feeling, still has this feeling, that we cannot allow Iran to fall into the Soviet camp. Khomeini is 86. He's been reported and reported in ill health and on the verge of death. We have no contacts there. We are alone. Well, not alone, but we are one of six nations that doesn't have an ambas- sador or some type of relationship with that country. We are in the position of not being able to be ballplayers there if any type of situation erupts as a result of the Ayatollah and we should have contacts. Secondly, there is no doubt in our minds that they have an enormous amount of in- fluence on various religious factions within But I have to be a little bit personal here. In my other capacity as head of Merrill, Lynch, I opened an office in Tehran for Merrill, Lynch and have very close connec- tions in Tehran in the era of the Shah during the '70s. I believed in that country and I thought that that country had quite a future. And I recognized that for us, the United States, to have no connections whatsoever with Iran was a foolish thing to do from an international political point of view as well as an economic point of view. And, accordingly, I was all for keeping a line open to whoever was the constituted government of Iran in an effort to some- time be a player in that country's future. (Id. at 36-37) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 - Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The Secretary of Defense had an imprecise recollection of the meeting, except with regard to one point: The only time that I got the impression the President was for this thing was in Jan- uary, which was January 6 or 7, and at that time it became very apparent to me that the cause I was supporting was lost and that the President was for it. And shortly after that, we got a call, I didn't, but Colin Powell did, I believe, from John Poindexter who by that time had succeeded, saying there had been such a decision and the President wanted us to proceed with the transfer of this intitial set of arms. The numbers changed. I think initially it was 2,000, and went up to 4,000, but they were to be transferred in amounts sort of as drawn. But we were to transfer them to the CIA and to nobody else. And I made clear that that was the only way that we would oper- ate, that it had to be transferred to the CIA, not directly by us to anyone else be- cause we couldn't do that, and that it had to be an Economy Act transfer, which as you know, means we've got to be paid value for it. I said we would carry out the Commander- in-Chief's orders to do this, and obviously we would hold it as closely as possible be- cause that was not only the direction but the obvious thing to do. (Weinberger 14-15) The President signed a new Finding, identi- cal to the January 6 document with Sporkin's revision, on January 17. He told the Board on January 26, 1987, that the Finding was present- ed to him under cover of a memorandum from Poindexter of the same date. The President said he was briefed on the contents of the memorandum but stated that he did not read it. This is reflected in Poindexter's hand-writ- ten note on the memorandum. That note also indicates that the Vice President, Regan, and Fortier were present for the briefing. Regan did not recall the event. He wondered if Poindexter had not simply placed the docu- ment in the President's daily briefing book for signature during the morning intelligence brief- ing. (Regan 20, 41-42) The Action Memorandum to the President to which the Finding was attached differed in few, but material respects from the memorandum submitted January 6. Unlike the earlier memo- randum, it noted that the President had already discussed the matter with his principal advisors. It also contained a test for success: if, after 1,000 TOWs were transferred to Iran, the hos- tages were not released, the program would terminate.41 The latter part of the memoran- dum contained the material changes. Some time ago Attorney General William French Smith determined that under an appropriate finding you could authorize the CIA to sell arms to countries outside of the provisions of the laws and reporting requirements for foreign military sales. 41 According to the CIA Inspector General, the Secretary of Defense, the Attorney General, the Director of Central Intelli- gence, and Poindexter met and discussed delaying Congressional notification. (CIA/IG Chronology 15) The Secretary of Defense did not remember the meeting. (Weinberger 56) The Attorney General recalled that Sporkin attended the January 16 meeting in Poindexter's office. Discussion focused on the law regarding arms exports and notice to Congress. (Meese 15-20) Possibly in preparation for this meeting, the CIA General Counsel's Office prepared the following talking points for the Di- rector of Central Intelligence: "The Israelis are moving ahead on their Tow for Hostage deal with the Iranians. You recall that in Sporkin's legal analysis there were two options: One for DoD to do it directly with the Israelis, the other to do it through CIA. Sporkin feels that the most de- fensible way to do it from a legal standpoint is through CIA. We prefer keeping CIA out of the execution even though a Presiden- tial Finding would ' authorize the way Defense would have to handle the transactions. "Under this option the idea was that the Israelis would buy the improved version of the TOWs and ship the basic TOWs they now have to the Israelis [sic]. The Israelis would then replace those basic TOWs by buying the improved version. Unfortunate- ly, there is not enough money available to do this. The Iranians have placed $22 million in an account in Switzerland. This is enough for the basic TOWs but for the Israelis to buy the im- proved version would cost about $44 million. "Therefore, they want to use the second option under which CIA would buy 4,000 basic TOWs from DoD for $21 million. As far as Defense is concerned these purchases would be purchased in general for CIA uses for assistance in [country names deleted] and other purposes. The money for the Iranian account would be transferred to the Israelis. The Israelis would transfer that money to a CIA account to pay for this purchase, provide the TOWs from DoD, the shippers would move the TOWs to the Israelis who would then move them on to the Iranians. The' Israelis would keep their basic TOWs and the problem of upgrading them to the new TOWs would be handled in the normal DoD Israeli relationship. "I am told that time is of the essence in getting this done for two reasons: First, the situation in Lebanon is deteriorating so that any dalay [sic] we can see in the prospects of getting the hostages out of Lebanon should be avoided... . Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The objectives of the Israeli plan could be met if the CIA, using an authorized agent as necessary, purchased arms from the De- partment of Defense under the Economy Act and then transferred them to Iran di- rectly after receiving appropriate payment from Iran. The Covert Action Finding attached at Tab A provides the latitude for the transactions indicated above to proceed. The Iranians have indicated an immediate requirement for 4,000 basic TOW weapons for use in the launchers they already hold. The Israe- li's [sic] are also sensitive to a strong U.S. desire to free our Beirut hostages and have insisted that the Iranians demonstrate both influence and good intent by an early re- lease of the five Americans. Both sides have agreed that the hostages will be im- mediately released upon commencement of this action. Prime Minister Peres had his emissary pointedly note that they well un- derstand our position on not making con- cessions to terrorists. They also point out, however, that terrorist groups, movements, and organizations are significantly easier to influence through governments than they are by direct approach. In that we have been unable to exercise any suasion over Hezballah during the course of nearly two years of kidnappings, this approach through the government of Iran may well be our only way to achieve the release of the Americans held in Beirut. It must again be noted that since this dialogue with the Iranians began in September, Reverend Weir has been released and there have been no Shia terrorist attacks against American or Israeli persons, property, or interests. Therefore it is proposed that Israel make the necessary arrangements for the sale of 4,000 TOW weapons to Iran. Sufficient funds to cover the sale would be transferred to an agent of the CIA.42 The CIA would then purchase the weapons from the Department of Defense and deliver the weapons to Iran through the agent. If all of the hostages are not released after the first shipment of 1,000 weapons, fur- ther transfers would cease. On the other hand, since hostage release is in some respects a byproduct of a larger effort to develop ties to potentially moder- ate forces in Iran, you may wish to redirect such transfers to other groups within the government at a later time. The Israelis have asked for our urgent re- sponse to this proposal so that they can plan accordingly. They note that conditions inside both Iran and Lebanon are highly volatile. The Israelis are cognizant that this entire operation will be terminated if the Iranians abandon their goal of moderating their government or allow further acts of terrorism. You have discussed the general outlines of the Israeli plan with Secretaries Shultz and Weinberger, Attorney General Meese and Director Casey. The Secre- taries do not recommend you proceed with this plan. Attorney General Meese and Director Casey believe the short-term and long-term ob- jectives of the plan warrant the policy risks in- volved and recommend you approve the at- tached Finding. Because of the extreme sensi- tivity of this project, it is recommended that you exercise your statutory prerogative to with- hold notification of the Finding to the Congres- sional oversight committees until such time that you deem it to be appropriate. At the bottom of this page appeared: Recommendation OK NO "RR per JMP" That you sign the attached Finding. Prepared by: Oliver L. North Attachment Tab A-Covert Action Finding "1000 17 Jan 86 President was briefed verbally from this paper. VP, Don Regan and Don Fortier were present. JP? The President made the point to the Board that arms were not given to Iran but sold, and that the purpose was to improve the stature within Iran of particular elements seeking ties to the Iranian military. The President distin- guished between selling arms to someone be- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 lieved to be able to exert influence with respect to the hostages and dealing directly with kid- nappers. The President told the Board that only the latter would "make it pay" to take hos- tages. The President told the Board that he had not been advised at any time during this period how the plan would be implemented. He said he thought that Israeli government officials would be involved. He assumed that the U.S. side would be on its guard against people such as Mr. McFarlane had met in London in early December. He indicated that Director Casey had not suggested to him at any time that the CIA assume operational responsibility for the initiative, nor was he advised of the downside risks if the NSC staff ran the operation. He re- calls understanding at the time that he had a right to defer notice to Congress, and being concerned that any leaks would result in the death of those with whom the United States sought to deal in Iran. VI. The United States Sells Iran 1,000 TOW Missiles. Before the President signed the Finding of January 17, 1986, North began to lash together the CIA and Department of Defense to imple- ment the plan he had outlined to Poindexter in December and incorporated in Poindexter's memoranda to the President in January. Before January 17, he encountered resistance. Poin- dexter asked him to discuss the matter with the Director of Central Intelligence. North did so on January 14. He reported that I[n] A[ccordance] W[ith] yr direction, met w/Casey last night after W'bgr speech at Ft. McNair. Casey then tried to contact Cap but he had already departed. Casey has called urging that you convene a mtg w/ he and Cap ASAP so that we can move on. Casey's view is that Cap will continue to create roadblocks until he is told by you that the President wants this to move NOW and that Cap will have to make it work. Casey points out that we have now gone through three different methodolo- gies in an effort to satisfy Cap's concerns and that no matter what we do there is always a new objection. As far as Casey is concerned our earlier method of having Copp deal directly with the DoD as a pur- chasing agent was fine. He did not see any particular problem w/ making Copp an agent for the CIA in this endeavor but he is concerned that Cap will find some new objection unless he is told to proceed. Colin Powell, who sat next to me during Cap's speech asked the following questions (my answers are indicated): Q. Does Copp deal w/ Iranians or Is- raelis? Q. Is the intelligence a prerequisite? A. It is probably something that can be negotiated but in any event it is not a DoD matter. It is covered in the [January 6] finding and is in fact one of the few means we have to make a long term penetration in Iran. Our ul- timate objective of changing/moderat- ing the govt. is served by this. Q. What cost are the Israelis willing to pay for the basic TOWs? A. They (thru Copp) have funds to pay Fair Market Value (FMV should be about $4900-5400 ea. depending on age) and to cover the cost of transpor- tation. They do not have enough to pay for I TOW (about $9500 ea. or TOW II (about $15000 ea.). We have frequently sold the Israelis weaps/ma- teriel at FMV vice the replacement cost to the U.S. Since we have over [quantity deleted] of the basic TOW in our inventory and cannot even use it in training due to its age, we ought to look at this as an opportunity to col- lect on a weapon which we aren't using [location deleted] according to Koch) and will eventually have to dis- pose of because we cannot sell them off otherwise. (I'm told that Hughes Acft, the mfgr. has an agreement w/ DoD that all normal FMS transactions will be handled as a producer sale in order to keep DoD fm undercutting the production line by selling off old stocks). The most recent proposal (Copp as agent for the CIA and sales to the Israelis who Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 then deliver weaps to the Iranians) can only work if we can get the Israelis to come up on their price. I have been unable to contact NIR who is in Europe for a meeting w/ an Iranian. He still does not know that we are aware that the Iranians have offered $10K per TOW. He has how- ever left a message that we must have a go/no go decision today and that condi- tions in Brt. [Beirut] continue to deterio- rate. You shd also have seen yesterday's [intelligence report] which pertains. (North PROF note to Poindexter. 1/15/86, 12:04:22; 13:01:06) While coordinating with the Defense Depart- ment and the Director of Central Intelligence, North also spoke to Nir about the Israeli-Ghor- banifar side of the transaction. Nir, who had just spent thirty-six hours in Lebanon, "be- lieves that Gorba does indeed have at least $10,000 per Tow [sic] available," North report- ed to Poindexter on January 15, "and that Gorba probably lied to Schwimmer and that Schwimmer probably lied to Nir re how much there was available. Nir is fully prepared to proceed any way we wish but noted that time is rapidly running out." (North PROF note to Poindexter, 1/15/86, 15:41:44) Nir explained his sense of urgency later that day. [H]e believes the GOI [Government of Israel] is about to formally withdraw its offer to assist on this matter so that it cannot be blamed when the AMCITS are killed. I asked him about [t]he rumor that one had already been killed. He replied that it was probably another of the Jews since they (Hezballah) will undoubtedly kill the Jews first to make their point. I then asked Nir to reconfirm, the require- ments as he understood them. He said that the Iranians want 1000 TOWs, 25 Mos- lems released by Lahad and the AMCITs and any surviving jews [sic] wd be released along w/ the Brit if they (the IRG) [Iranian Revolutionary Guard] can still find him. . The Israelis are very very concerned that they cannot make a delivery of 1000 TOWs w/o a promise to replenish. Nir points out that he is operating in an envi- ronment which is very hostile since the USG never made good on its promise to promptly replenish the original 504 [sic] TOWs that they shipped in September and that if we had but sent these TOWs as promised it might have been possible to take the further risk of another 1000. IAW instructions have invited Sec W'bgr to mtg w/ Casey in yr ofc at 1700 on Thursday. It is my sense that by that time we will have a msg fm the GOI that they are withdrawing their offer. Is it possible to arrange a telephone conference call to- night to see if we can make this work? (North PROF note to Poindexter, 1/15/86, 18:37:47) To clear up the confusion about what the United States had or had not promised Israel, on January 14, Poindexter asked North to speak to McFarlane. As I [North] understand it, there was a USG commitment to SELL, over time, re- placements to the Israelis for what they sent for Weir. We DO, according to RCM [McFarlane] have a commitment to make this SALE. We did NOT have any agree- ment on prices or ultimate dates, though it was understood by both sides that the transaction wd be concluded promptly. (North PROF note to Poindexter, 1/15/86, 13:39:54 (reply to note of 1/15/86) Also on in- structions from Poindexter, North spoke again to Nir about how implementation was supposed to proceed, and how it, in fact, proceeded. Problems abounded. As I understand the current problem w/ the purchase of the 504 [sic: 508]: -The Israelis received funds adequate to purchase only the basic TOW. Whether this is because Schwimmer pocketed the rest or whether there was a kick-back to [Iranian officials in Tehran],, neither Nir nor I know. Gorba told me that he had paid $10000 apiece for these weaps and pocketed $500 for each one delivered. -When the Israeli purchasing office in NYC, following their normal proce- dures, made inquiries w/ the Army Materiel Command (AMC) on the Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 availability and price of basic TOWs, the AMC immediately began to ques- tion why the IDF wanted to revert to the basic model which was no longer in production and the IDF has already begun purchases of the I TOW for their inventory upgrade. AMC noted that there was an "understanding" with the Mfgr not to compete w/ the production line by selling the older weaps fm army stocks and that selling fm Army stocks wd be the only source available for the basic TOW. At this point, the purchasing office terminated the inquiry since they believed that the purchase wd raise so many questions that it wd leak and complicate further action which, by then, was in the plan- ning stages. The Israelis have made no further effort to purchase the basic TOWs but have been told in an unso- licited call from AMC that the basic model wd have to be the same price as the I TOW so that the AMC can re- cover replacement costs. -Nir continues to be apprehensive about going back in to ask his people to ship w/o some kind of guarantee of replenishment whether or not it suc- ceeds in getting the hostages out. He is going to get back to me at 0300 EST re results of his meeting w/ the P.M. I passed yr msg verbatim to in- clude "cool yr plans on going into the Bekka." He laughed and noted that the IDF would have even greater im- petus to go into the Bekka if the hos- tages were killed rather than released, thus there are some who have argued against proceeding on this tack any further since it jeopardizes Israel w/ no promise of return. (Id.) In light of these arrangements and obsta- cles, North proposed simplifying the mechanics by reducing the number of participants. At this point I believe that we could pro- ceed along the following lines. Nir goes di- rectly to Gorba (cutting out Schwimmer [and the Tehran contacts] and gets $10M for 1000 basic TOWs. He then sends 1000 basic TOWs fm Israeli stocks to Iran. ho- pefull [sic] the hostages are then released. He gives Secord whatever the FMV price is for 504 TOWs from the $10M (should be about $2.8M). Secord then buys and ships 504 Tows to Israel as replacement for the first exchange (Weir). This process wd at least provide the IDF w/ one third of what they had withdrawn from inventory. It is important to note that in my last discus- sion with Nir (he doesn't sleep either) he is very concerned about credibility all around. He noted that before they shipped the first 504, they had what they believed to be an ironclad promise to allow them to buy replacements but that all along the way there have been obstacles. He has con- fided that part of the pressure is indeed political in that he is concerned about a leak inside the cabinet from someone who is disaffected over the drawdown of stocks, but if we wanted him to push for it he would. I believe that Nir himself is both so exhausted and in such jeopardy of losing his job over this that he may no longer be functional. I do not believe that Nir is lying to us. I do believe he is sincerely con- cerned about the outcome and wants to do what he can-for both Israel and the U.S. He has promptly agreed to every proposal we have made to date except the final one of shipping 1000 TOWs w/o promise of replenishment. He will be back to us. Will advise. (Id.) The Americans pushed for a meeting with an important Iranian official. McFarlane asked Poindexter to have North find out from Nir when the meeting could take place. Kimche had told Ledeen that January 24 would be conven- ient. (McFarlane PROF note to Poindexter, 1/ 14/86, 08:08; Poindexter PROF note to North, 1/14/86, 09:27:35) Two days later, North re- ported that Nir has advised that the 24th still appears good IF we are proceeding w/ the first step of the long range plan to change, the govt-ending the hostage problem and getting rid of the 18 HAWK missiles still parked in Tehran. He believes that if the first step is scrubbed that the mtg will be too. He will get back to us on Tuesday next week [January 23] re location and go/ Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 no-go decision if we make an affirmative decision on the first steps re the hostages. (North PROF note to Poindexter, 1/16/86, 13:39:54) At the same time, the Director of Central In- telligence, Poindexter, and North expressed concern about Ledeen's role. Have told this to Ami [?Nir]. You [Poin- dexter] should be aware, however, that it is my opinion, based on my meeting w/ Gorba on Monday night [January 13], that Gorba tells Ledeen everything. Ami sus- pects that there is probably a secret busi- ness arrangement among Schwimmer, Ledeen and Gorba that is being conducted w/o the knowledge of any of the three re- spective governments and that this will result in at least some cross-fertilization of information. This may not be altogether bad if we can keep in touch w/ Ledeen enough to get a feel for what is really going on. I have no problem w/ someone making an honest profit on honest busi- ness. I do have a problem if it means the compromise of sensitive political or oper- ational details. We might consider making Mike a contract employee of the CIA and requiring him to take a periodic polygraph. Yes? No? (North PROF note to Poindexter, 1/16/86, 13:50:49) Further, Casey shares our concerns. More-recent in- formation tends to indicate that there is even further grounds for concern given what may well be/have been a financial ar- rangement among Schwimmer, Nimrod[i], Gorba and our friend. (North PROF note to Poindexter, 1/24/86, 10:40:36) Perhaps because of these doubts, Ledeen ceased to be an official American con- tact with Ghorbanifar. A. Launching `Operation Recovery" The day after the President signed the Find- ing, the CIA formally joined the program. Clair George, Director of Operations, Sporkin, and Chief of the Near East Division (C/NE), met Poindexter, North, and Secord and read the Finding. (C/NE (1) 4; George 9) C/NE and North then discussed logistics and financing. "At the meeting on that Saturday [January 18]," C/NE recalled, "it was clear that what was needed was 4,508 TOW missiles, which were to be sold to the Iranians as a portion of a larger strategic effort which would get all the American hostages back out, but would also move to changing the nature of the relation- ship with the U.S. and the Iranians." (C/NE (1) 4) C/NE thought the program had been "an NSC operation" since November; nothing that subsequently happened changed his mind. (Id. at 43, 44) North instructed C/NE to contact General Powell about arranging for the CIA to purchase the missiles from the Defense Department; C/ NE found Powell already working on the prob- lem. Powell directed C/NE to consult Major General Russo, Assistant Deputy Chief of Staff for [Army] Logistics, about pricing. When in- formed that the TOWs would cost some $6,000 each, North told C/NE that old TOWs, useless to the American Army and in less than optimal condition, would suffice. These cost about $3,407 a piece. (Id. at 4-6) The Defense De- partment insisted on being paid value for the missiles; the CIA insisted that its treasury not provide a float; and the Iranians would pay only on delivery. North needed a Swiss bank account to hold the money. C/NE provided an already existing account as the quickest solu- tion to North's problem. Setting up a new ac- count for the sums in question would take time. (Id. at 6) The structure made Ghorbanifar important to success; he raised the necessary "venture capital." (Id. at 7) As a result of the polygraph, George decided not to use Ghorbanifar for in- telligence or covert actions and, moreover, to terminate CIA relations with Ledeen. (CIA/IG Chronology 14 (1/12 or 13/86)) The Director of Central Intelligence took a more flexible po- sition, and C/NE followed his lead. The Director's position when this started up, late January-early February, was Ghor- banifar is a rascal. They had a lot of expe- rience with this guy. He's unreliable. But the channel, there's something in this channel that's working and it's worth a try, and nothing else is working, so let's see where it goes. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 _ Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 And if it doesn't go, we'll turn it off. (C/NE (1) 23-24) Deputy Director John McMahon, who had opposed arms transfers to Iran from the begin- ning, read the January 17 Finding on January 24. "[G]iving TOW missiles was one thing," he remembered telling Poindexter. "[G]iving them intelligence gave them a definite offensive edge, and I said that can have cataclysmic re- sults." U. McMahon 14) He was unimpressed with Poindexter's description of the plan: [G]ive some intelligence to the Iranians on the Iraqi front, . . . to establish bona fides that the U.S. really was intent on moving in this direction, and then give them 1,000 TOW missiles and then see what the Irani- ans did, like release a hostage. I objected to that. Poindexter didn't take me on. He didn't challenge that at all, but he said: We have an opportunity here that we should not miss, and we ought to pro- ceed to explore it; and if it doesn't work, all we've lost is a little intelligence and 1,000 TOW missiles; and if it does work, then maybe we can change a lot of things in the Mideast. So I came back to the building. Bill Casey was [abroad] at the time. I sent him a cable laying out what was happening, saying we have a directive from the President, a find- ing to do this, Poindexter said that the At- torney General had checked off on it, and that we were so directed to proceed to support the mission. And I said, I am so proceeding. I asked for confirmation from Bill to make sure that he was aware of what was happening, and I didn't receive any. Casey had moved on to [country name deleted], so I sent it again to [country name deleted]. And it came back saying: Yes, he has read it and con- firmed, and he had seen it. Then we proceeded to have DoD transfer weapons to us, and we would arrange for the flights over there. All throughout this, I must insist that even at its peak the Agency was only in a supportive role. We took directions, we followed directions. (Id. at 14-16) On January 26, McMahon per- suaded North to provide the Iranians only a segment of the Iraqi front. It would show American good faith without giving the Irani- ans a fighting edge. (Id. at 16-17) According to the CIA Inspector General, North met Ghorbanifar in London before Janu- ary 24. Among other things, they may have agreed that the United States would provide Ghorbanifar with some intelligence about the Iraqi front. (CIA/IG Chronology 17) Charles Allen transmitted the "limited" intelligence in London on the 26th; Ghorbanifar gave him in- formation about Iranian terrorism in exchange. (C. Allen 13) 43 When North returned from a late January meeting with Ghorbanifar in London, he pre- pared "a notional timeline for major events in Operation Recovery." (North to Poindexter, draft Action Memorandum, 1/24/86.) 44 "[T]he only persons completely cognizant of this schedule," North wrote, "are: John Poin- dexter, Don Fortier, Oliver North, John McMa- hon, Clair George, C/NE, Dewey Clarridge, Richard Secord, Amiram Nir, Prime Minister Shimon Peres." (Id.) The timeline was attached: Notional Timeline for Operation Recovery Friday, January 24 -CIA provide cube and weight data to Copp for a/c loading. -CIA prepare intel sample for pass to Gorba. -Copp provide a/c tail # to CIA for pickup. . . . Saturday, January 25 -Dispatch intel sample to Gorba via Charlie Allen. Sunday, January 26 -C. Allen deliver intel sample to Gorba at Churchill Hotel, London. 43 The CIA Inspector General dated this meeting January 25. (CIA/IG Chronology 18) 44 North's draft recommended that Poindexter privately discuss the subject with the President. There is no evidence that the Memorandum was put into final form. It bears the caption "PLEASE DESTROY AFTER READING". Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 -Copp finalize a/c requirements w/ air carrier in Oklahoma. Monday, January 27 -Gorba place intel sample on 1300 GMT flight to Tehran fm Frankfurt, Germany. Wednesday, January 29 -Gorba transfer funds for purchase/ transport of 1000 basic TOWs to Is- raeli account at Credit Suisse Bank, Geneva. -Israeli account manager automatical- ly transfers deposit fm Israeli account to Copp account in same bank (bank record keeping transaction). -Copp's account manager automati- cally transfers $6M to CIA account in same bank (bank record keeping trans- action). Thursday, January 30 -CIA transfers $6M to DoD account by wire service transaction. -CIA orders movement of 1000 TOW missiles fm DoD storage facility Anniston, Alabama ... -CIA bills Copp account $26K for cost of moving 1000 TOW missiles fm Anniston, Alabama ... Sunday, February 2 -Copp travels to Israel for site survey of transfer point (Eliat [sic], Israel). -Copp proceeds to rendezvous w/ Clarridge to establish command post. Monday, February 3 -Lahad responds to papal ltr that he will release 50 Hezballah prisoners in 2 groups of 25. Tuesday, February 4 -1000 TOWs sanitized and prepared for shipping.... -Copp a/c packers arrive ... and ar- range for Copp a/c to lift TOWs fm Kelly AF Base, San Antonio, TX, on CIA contract. Wednesday, February 5 -Copp a/c arrives Kelly AF Base for loading. -CIA provides remainder of first intel sample to Gorba at Iranian Embassy in Bonn, Germany. Thursday, February 6 -Copp a/c commence lifting TOWs fm Kelly AF Base to transfer point at Eliat, Israel. -Israeli AF "sterilized" 707 a/c ar- rives at transfer point for loading. -Copp aircrew arrives Eliat, Israel, to pilot Israeli a/c. - Remainder of first intel sample flown fm Germany to Tehran in diplo- matic pouch on scheduled Iran Air- ways flight. Friday, February 7 -Israeli "sterile" a/c piloted by Copp crew commences movement of TOWs fm Eliat to Bandar Abbas, Iran, via Red Sea route. Saturday, February 8 -Delivery of 1000 TOWs completed. -25 Hezballah released by Lahad. -Returning Israeli a/c pickup 18 HAWK at Tehran airport for return to Israel. Sunday, February 9 -All U.S. hostages released to U.S./ British or Swiss Embassy. -Second group of 25 Hezballah re- leased by Lahad. -Israelis return $5.4M to Gorba when HAWKs land in Israel. Monday, February 10 -Gorba transfers funds to Israel ac- count for purchase/transportation of 3000 TOWs (amount transferred is Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 sufficient to cover purchase of 508 ad- ditional TOWs owed to Israel for Weir release and all transportation costs). -Israelis transfer funds to Copp ac- count at Credit Suisse Bank, Geneva. -Copp transfers funds to CIA ac- count for purchase/transportation of 3508 TOWs ($21.048M). -Four (4) remaining Lebanese Jews released by Hezballah. Tuesday, February 11 (Anniversary of Iranian-Islamic Revolution) -Khomheini steps down. -CIA transfers $21.048M to DoD ac- count for purchase of 3508 TOWs at $6K each. -CIA starts moving TOWs . . . fm Anniston, Alabama, in lots of 1000. Thursday, February 13 -Copp packers return ... Tuesday, February 18 -Copp a/c pickup 1000 TOWs at Kelly AF Base, Texas; deliver to trans- fer point (Eliat). -Israeli "sterilized" 707 a/c w/Copp crew commences delivery of 1000 TOWs to Iran. Thursday, February 20 -Copp a/c pickup 1000 TOWs at Kelly AF Base, Texas; deliver to trans- fer point (Eliat). -Israeli "sterilized" 707 a/c w/Copp crew commences delivery of 1000 TOWs to Iran. Saturday, February 22 -Copp a/c pickup 1000 TOWs at Kelly AF Base, Texas; deliver to trans- fer point (Eliat). -Israeli "sterilized" 707 a/c w/Copp crew commences delivery of 1000 TOWs to Iran. Monday, February 24 -Copp a/c returns . . . pickup 508 TOWs for delivery to Israel. -Collett (British hostage) and Italian hostages released and Buckley remains returned. Tuesday, February 25 -Second sample of intel provided to Gorba at Iranian Embassy in Bonn, Germany. . . . By early February, CIA had put in motion the acquisition of the weapons, designated a Swiss bank account, and arranged for two Boeing 707s to be at the disposal of General Secord at Kelly Air Force Base. (CIA/IG Chro- nology 18) B. Forward On February 5, North traveled to London. (North calendar) According to the NSC chro- nologies, he met Ghorbanifar, Nir, and Ghor- banifar's Tehran contact.45 Ghorbanifar told the Board Let's say this meeting is somewhere around between first of February till fifth of February. It took place in Frankfurt .. . The Iranian delegation stayed also in 45 According to the Maximum Version and the Historical Chronology, C/NE attended this meeting. (Maximum Version at 5, Historical Chronology at 9) The CIA Inspector General notes that a meeting occurred, but does not mention C/NE. (CIA/IG Chronology 18) C/NE denied that there was a meeting with the Tehran contact on February 15. (C/NE (1) 14) The Maximum Version states that the meeting was in Germany; the Historical Chronology places the meeting in London. The accounts of what was discussed are similar: --The Iranian intermediary (Ghorbanifar) would deposit funds in an Israeli account. -The Israelis would transfer funds to a sterile U.S.-con- trolled account in an overseas bank. -Using these funds, the CIA would covertly obtain materiel authorized for transfer from U.S. military stocks and trans- port this to Israel for onward movement to Iran. Using the procedures stipulated above, funds were deposited in the CIA account in Geneva on February 11, 1986 and on February 14 1,000 TOWs were transported to Israel for pre- positioning. The TOWs were off-loaded and placed in a covert Israeli facility. (Maximum Version 6. Cf. Historical Chronology 9) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Hotel Intercontinental, in Frankfurt-a mixture of Iranian authorities, from Prime Minister's [office] and Iranian officers from intelligence department. This is a historical meeting, after seven years of break, that the two top officials of the two countries, they come together for such an important meeting, such an impor- tant mission, to work out against the intel- ligence against the Russians, against the Iraqis, and also to clean the mess [the No- vember 1985 shipment of HAWKs]. (Ghorbanifar 131-32) On the American side, Ghorbanifar said, were North, Secord, and someone identified to Ghorbanifar as "one of the top senior officers from the CIA. His hair was all white, white hair, good looking-baby face.46 . . . No[t] Cave. Cave came later on for making the total disaster." (Id. at 134) Nir, who was always identified as an American in meet- ings with Iranian officials, (id. at 135-36), also attended. Ghorbanifar described a "happy" scene, with Americans kissing Iranians. (Id. at 136) The military men talked, and Mr. North told him [Ghorbanifar's Tehran contact] that if you want to know that we were good feeling, good gesture, we were not going to cheat you now. We take out what we brought back in mistake [the 18 HAWKs] and we give you 1,000 TOWs. And then the Iranian kissed them and they made again dinner party. (Id. at 137) The next day, Khashoggi lent Ghorbanifar $10 million to pay for the missiles; Khashoggi insisted on a 15-207o return to pay finance costs. On February 7, Ghorbanifar said, he [Khashoggi] deposited the money in Lake Resources' Swiss account. North "told us that this time no Israeli deal. Off. This is ourself we directly will dealing." (Id. at 138) The money was paid to Lake Resources di- rectly, and then they delivered the stuff. There was no talk of release of hostage. There was no hostage. So it is proof to you that there is no deal on hostage. There is no deal for hostage, tit for tat - give me, take this. You understand clearly it was a policy. It was a very big policy, very impor- tant strategic policy to go into water. No question about who is going. (Id. at 142) Whether or not this meeting took place as described by Ghorbanifar-his description does not resemble C/NE's of the Frankfurt meeting, February 24-25 (C/NE (1) 18-20)-North re- turned from London on February 7, (North cal- endar), with the operation in full swing. The next day or the day after, he met Charles Allen, C/NE, Noel Koch from the office of Assistant Secretary of Defense Armitage, and Secord to review the schedule. TOW missiles would be delivered, hostages released, and Buckley's body returned by early March 1986. (C. Allen 14) At North's request, C/NE made flight ar- rangements for Southern Air Transport, a former CIA proprietary, to fly into Kelly Air Force base. (CIA/IG Chronology 19) The United States Army made a record of its role in the TOW transfer because of Congres- sional reporting requirements. Under the Intel- ligence Authorization Act for Fiscal Year 1986, transfers of defense articles or services by an intelligence agency worth $1 million had to be reported to Congressional intelligence commit- tees. Once apprised of this statute, the Army General Counsel advised Russo that where the Army "support[s] another agency, it is respon- sible to make the necessary notification." (Russo, note, 2/13/86, on Crawford to Marsh, 2/13/86) "During the course of coordination with OSD (M[ajor] G[eneral] Powell) and O[ffice of the] S[ecretary of the] A[rmy] G[eneral] C[ounsel], questions were asked as to the responsibility for end item usage. This was identified as a responsibility of the receiv- er." (Russo, "Support for Intelligence Activi- ties," 2/25/86.) The "receiver" was Southern Air Transport, operating under the direction of General Secord and Colonel North. The Army's involvement began on January 18 when it received a request to deliver 3,504 (later increased to 4,509) TOW missiles to "the receiver" at Redstone Airfield, for an unknown purpose and destination. Transfer depended on receipt of funds by the receiving agency. It was delayed. On February 10 and 11, a total of $3.7 million was deposited (by Ghorbanifar) in the CIA account used to pay for 1,000 TOW missiles. (CIA/IG Chronology 19) Having re- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ceived certification that the money was avail- able, the Army delivered the first 1,000 missiles on February 13-14. North's and Secord's reports complete the story of the delivery. North's notional timeline had to change. On February 13, 1986, North wrote Poindexter that Operation RESCUE is now under way. 1000 items are currently enroute [sic] . . . from Anniston[,] Alabama. Copp is en- route to Ben Gurion Apt [airport] to con- duct final briefing for his flight crews who arrived today and commenced fam flights on the two Israeli 707s. All 1000 items will lift off from Kelly AFB at 1400 on Satur- day. 500 will be delivered to Bandar Abbas to arrive at dawn on Monday [February 17]. The meeting we had wanted has now been slipped to Weds [February 19] by Gorba. We will explore a second mtg/ agenda/location/participants w/ him at this mtg per yr dir. Second 500 will go to Bandar Abbas on Friday vice Thurs. Copp, North plan to meet in Frankfurt on Tues. [February 18] along w/ one of Dewey's people to wire my hotel room for mtg. Carrying the luggage C/NE gave me for this purpose is too much of a hassle going thru customs/airport security in Europe.47 If all goes according to plan, Lahad will re- lease 25 Hizballah . . ., hopefully on Friday. This wd keep our schedule for re- leasing the Americans on for Sunday, Feb. 23. Something to pray for at church that day.48 (North PROF note to Poindexter, 2/13/86, 21:39:47) On February 18, 1986, North asked Poin- dexter to authorize the issuance of alias docu- mentation for the delegation that would travel to Germany to meet Ghorbanifar and his Tehran contact on the 19th. (C/NE (1) 14) His 47 Possibly a reference to video and recording devices request- ed by C/NE on January 21. (CIA/IG Chronology 16) 48The Secretary of State recalled that "[o]n January 22, my staff noted reports received about Lieutenant Colonel North. They speculated that perhaps the operation was alive again. But the reports seemed implausible, namely a proposal by Lieutenant Colonel North to seek the help of the Pope and Cardinal O'Con- nor, and to trade some Shia prisoners held by General Lahad in South Lebanon as Nir had earlier suggested. "I heard nothing more until February 28, 1986." (Shultz, SRB, 50-51) memorandum reproduced Secord's February 18 report of the first delivery of 500 TOWs. Aircraft returned safely to Ben Gurion this morning at 0730 EST. Seventeen HAWK missiles 49 aboard. Gorba called one hour ago. [Ghorbanifar's Tehran contact] will head Iranian side of meeting in Ger- many along with five others. Iranians will provide all names after we give names and titles to them through Gorba. All will arrive via private plane in Frankfurt, Thursday [February 19] p.m. Meeting to start at 1700 in Iranian Embassy (sic) for two hours. Iranians have asked for second delivery of 500 TOWS on Friday a.m. They say they will release all hostages, if, repeat, if [intelligence is good]. They say we will get hostages Friday or Saturday. They en- vision a future meeting in Iran with us to consider next steps while we are delivering balance of TOWs (3,000). We have already rejected embassy as meeting site. Suggest- ed following names from our side: Nir (Office of Israeli Prime Minister) MGEN Adams (Director, Current Intelli- gence-DIA) (AKA-Secord) William Goode (Office of President) Albert Hakim (Support Assistant to Direc- tor DIA) (Secord to North, 2/18/86, [?received at] 8:30 a.m., in North to Poindexter, 2/18/86) North identified Hakim for Poindexter as "VP of one of the European companies set up to handle aid to resistance movement. He is fluent in farsi [sic] and would need one time alias docu- mentation as a DIA official." (Id.) 60 Secord, 49 Ghorbanifar told the Board that one of the 18 HAWK mis- siles had been test-fired against an Iraqi fighter over Kharg Island. (Ghorbanifar 143) 80 In discussing what he insisted was a meeting in Frankfurt in the first week of February, but which he may have confused with the meeting February 20, Ghorbanifar told the Board that when he heard that Hakim was to attend the meeting, he successfully persuaded the Americans to change the delegation. I said are you crazy? The Albert Hakim is known to all Iranian intelligence agencies and Iranian authorities, that he works, is operating for CIA. He was acting against Islamic Republic by CIA in 1980 and 1981, in Turkey, in the form of companies performing for making trouble for them in the Turkish border, and so on. They know him. If he comes in, they call this again another trick. So, I don't accept that such a man comes. They call me back in two days and say you are right. (Ghorbanifar 133) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 using the alias Major General Adams, also needed documents-"[t]o date, CIA has re- fused to provide him with any alias documenta- tion." North wrote, "we appear to be much closer to a solution than earlier believed. [The attend- ance by an official from the Prime Minister's office] at the Frankfurt meeting tends to sup- port our hope that this whole endeavor can succeed this week, if we appear to be forthcom- ing." (Id.) On February 20, North, Nir, C/NE, and Secord met Ghorbanifar in Frankfurt. (North calendar) They expected the official from the Prime Minister's office, but he did not appear. C/NE remembered that: "we told Ghorbanifar to let us know when his Iranian friend came, that we were going home, and that we wouldn't be back until we had a confirmation that the Iranian had come off from Tehran and was waiting." That happened within a week. (C/NE (1) 13) 51 (CIA/IG Chronology 19) On February 20, a deposit of $7.85 million was made to an Irani- 51 C/NE remembered who attended and that the meeting took place February 19. (C/NE (1) 14) According to the Maximum Version, the meeting occurred February 19-2 1. U.S. and Iranian officials (NSC and CIA) met again in Germa- ny to discuss problems in arranging a meeting among higher-level officials. At this meeting, the U.S. side agreed to provide 1,000 TOWs to Iran as a clear signal of U.S. sinceri- ty. This delivery was commenced on the morning of Febru- ary 20 and completed in two transits to Tehran on February 21. (Maximum Version 6) The Historical Chronology states: On February 19-21, U.S. (NSC and CIA), Israel; and Iranian officials met in Germany to discuss problems in arranging a meeting among higher-level officials. After coded authoriza- tion was received from Washington, the U.S. side agreed to provide 1,000 TOWs to Iran as a clear signal of U.S. sinceri- ty. This delivery was commenced on the morning of Febru- ary 20 and completed in two transits to Tehran on February 21. Transportation from Israel to Iran was aboard a false flag Israeli aircraft. On the return flight from Iran, these air- craft carried the 18 HAWK [sic] missiles which Israel had sent to Tehran in November 1985 with USG aforeknow- ledge. [sic] (Historical Chronology 10) The CIA Inspector General's chronology states: 19 February 1986: C/NE, North, Secord, and Nir meet with Ghorbanifar in Frankfurt. Iranian officials are expected, but do not show. 20 or 21 February 1986: The delivery of 1,000 TOWs from Israel to Iran begins, using a false flag aircraft. (The back- load on the return flight from Tehran was the HAWK mis- siles which had been shipped in November 1985. The Irani- ans returned them because they were outdated models. The delivery is completed 27 February.) (CIA/IG Chronology 19) an account at Credit Swisse in connection with the delivery of the TOWs. On February 24, North went to Frankfurt to meet the official from the Iranian Prime Minis- ter's office. He returned through London. In Frankfurt, he, Secord, Hakim, Nir, Ghorbanifar, and Iranian officials held the meeting the Americans thought was going to occur the 20th. North returned to Washington on Febru- ary 26 and reported on the meeting the next day to the Director of Central Intelligence, Poindexter, and McFarlane. He wrote McFar- lane: Just returned last night from mtg w/ [offi- cial from the Iranian Prime Minister's office] in Frankfurt. If nothing else the meeting serves to emphasize the need for direct contact with these people rather than continue the process by which we deal through intermediaries like Gorbani- fahr [sic]. Because CIA wd not provide a translator for the sessions, we used Albert Hakim, an AMCIT.who runs the European operation for our Nicaraguan support ac- tivity. [C/NE] accompanied so that I wd have someone along who wd provide "ob- jective" account. Throughout the session, Gorbanifahr in- tentionally distorted much of the transla- tion and had to be corrected by our man on occasions so numerous that [the Iranian official] finally had Albert translate both ways. Assessment of mtg & agreement we reached as follows: -[the Iranian official] has authority to make his own decisions on matters of great import. -He does not have to check back w/ Tehran on decisions take [sic]. -The govt. of Iran is terrified of a new Soviet threat. -They are seeking a rapprochement but are filled w/ fear & mistrust. -All hostages will be released during rpt during the next meeting. -They want next mtg urgently and have sug- gested Qeshm Is. [sic] off Bandar Abbas. -They are less interested in Iran/Iraq war than we originally believed. -They want technical advice. more than arms or intelli- . gence. -Tech advice slid be on commer- cial & military maintenance [sic]-not mil tactics-they committed to end anti-U.S. terrorism. -They noted the problems of Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 working thru intermediaries & prefer dir. contact-noted that this was first USG/ GOI contact in more than 5 yrs. [sic] Vy important-recognizes risks to both sides- noted need for secrecy. -stressed that there were new Sov. moves/threats that we were unaware of[.] While all of this could be so much smoke, I believe that we may well be on the verge of a major break- through-not only on the hostages/terror- ism but on the relationship as a whole. We need only to go to this meeting which has no agenda other than to listen to each other to release the hostages and start the process. Have briefed both JMP and Casey-neither very enthusiastic despite [C/NE]/North summary along lines above. Believe you shd be chartered to go early next wf [sic]-or maybe this weekend-but don't know how to make this happen. Have not told JMP that this note is being sent. Help. Pls call on secure yr earliest conven- ience. Warm, but fatigued regards, North. (North PROF note to McFarlane, 2/27/86, 8:54:13) C/NE recalled: This is the second meeting. This is the first meeting with [the official from the Prime Minister's office], the second February meeting. This is the first time we've had somebody like this out. It should be a very interesting experience. This is a man who . . . is on the low end of the scale in intel- ligence for [his former profession], and he's an even dumber member of the Irani- an Prime Minister's office, but he's full of a little fear and a little trepidation and a lot of distrust of the U.S., for we truly are the great Satan in his eyes. But he has been promised hundreds of Phoenix missiles, howitzers, TOWs; just about anything else he wants, he's going to get in this channel. He's promised that by Ghorbanifar in order to get him to this meeting. And we are promised that all the hostages will come out after the first two transactions, and that we are going to have a meeting with Rafsanjani and President Khameini within the first two months of this procedure, and one of the things in the scenario was that sometime in April there was a precise date given that Kho- meini was going to step down and that he was going to resign all powers. This is extraordinary nonsense. Essentially Ghorbanifar, as a negotiating technique, lied to both sides to get them to the table, and then sat back and watched us fight it out. It was a real slugging match. It was awful. At the end of the first meeting, which was at 3:00 a.m. on the 25th, we agreed to nothing except that we would have another meeting the next day. The next day's meeting was an agreement that we would proceed immediately to ship in 1,000 TOWs as a sign of our good faith and that [the Iranian official] would imme- diately arrange for one or two hostages to be released as a sign of their good faith. We left the meeting; nothing happened. No hostages. The communications were still going through Ghorbanifar. We had several hints at this meeting with [the Iranian official] that he wasn't happy with Ghorbanifar. Ghorbanifar was clearly very concerned that this Farsi speaker, Hakim, would in some way arrange to cut him out and have direct contacts with [the Iranian official]. There was enormous distrust all the way around. Nir was insistent that we keep Ghorbanifar in it. They had a relationship that went back with him prior to the revo- lution. So they know him well, and they recognize his limitations. They recognize that he's a congenital liar, but they know how to deal with it and they know how to use him. (C/NE (1) 18-20) On February 26 and 27 1986, the official from the Prime Minister's office remained in Frankfurt to coordinate the shipment to Bandar Abbas with his colleagues in Tehran. The morning of February 27, North heard from Secord. The second 500 of the 1,000 TOWs had been delivered to Iran. 707 has signaled success and due to land at Ben Gurion in a few minutes. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Met with Nir and Gorba this a.m. for one hour. Nir continues to agonize over the two soldiers, while Gorba worries about money matters and how he can stay in the center as the indispensible man. Nir then left for Tel Aviv. Subsequently, Gorba, Abe [Albert Hakim], and I met with [the Iranian official] for about one hour. Abe did beautiful job of rug merchanting with [the Iranian official] and also helped Gorba's ego a lot. He was extremely inter- ested in Russian intentions. He propagan- dized a lot about Iranian fighting spirit and we assured him Americans respected Irani- an people. He emphasized need for quick meeting at Kish 52 and said he would pos- sibly, repeat, possibly surprise us by getting some hostages released before meeting. [S]uggest you make contingency plan to accommodate early release (i.e., as early as Sunday). So, bottom line is on to Kish ASAP to seize the potential opening now created. ("Copp 2/27/86 1020. 161455Z Feb. 86") North wrote the following note on this message: " 1120 EST - 707 Back at B.G. Apt. Gorba got 13,200/missile Gets $260/mis- sile Gives $50/missile to Ledeen. (Handwritten note on id.) The Board has seen no evidence supporting the implication contained in this Document, and Ledeen "flatly" denied receiving any commis- sions in connection with the arms transfers to Iran. (Ledeen (1) 63) North reported his later activities of February 27 to McFarlane: Since the missive of this morning, met w/ Casey, JMP, [C/NE], Clair George and all have now agreed to press on. Believe we are indeed headed in the right direction. Just finished lengthy session w/ JMP he in- dicated that he has passed substance to you and has given me dates that you are not avail. 52 An "old SAVAK-maintained island off the coast of Iran." (C. Allen 15) Will endeavor to sched. mtg so that these do not conflict but noted to JMP that it was their call as to date of mtg. Just rec'd msg fm Secord via secure device we are using. [The Iranian official] has again reaf- firmed that once we have set a date we shall have a very pleasant surprise. Dick & I believe that they may be preparing to re- lease one of the hostages early. Dick also indicated that yr counterpart at the mtg wd be Rafsanjani. Nice crowd you run with! God willing Shultz will buy onto [sic] this tomorrow when JMP brief[s] him. With the grace of the good Lord and a little more hard work we will very soon have five AMCITS home and be on our way to a much more positive relationship than one which barters TOWs for lives. I value your friendship and confidence very highly and did not mean to infer that you had revealed these exchanges. By asking that you not indicate same to JMP I was only informing that I had not told him any- thing of it so as not to compromise myself at a point in time when he needs to be ab- solutely certain that this can work. He is, as only you can know, under tremendous pressure on this matter and very con- cerned that it go according to plan. My part in this was easy compared to his. I only had to deal with our enemies. He has to deal with the cabinet. Many thanks for yr. trust. Warm regards, North. (North PROF note to McFarlane, 2/27/86, 20:11:51) Meanwhile, McFarlane had written North that afternoon: Roger Ollie. Well done-if the world only knew how many times you have kept a semblance of integrity and gumption to US policy, they would make you Secretary of State. But they can't know and would com- plain if they did-such is the state of de- mocracy in the late 20th century. But the mission was terribly promising. As you know I do not hold Gorbanifar [sic] in high regard and so am particularly glad to hear of [the official in the Prime Minister's office] apparent authority. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 I have just gotten a note from John asking whether or not I could go some time next week and the President is on board. I agreed. So hunker down and get some rest; let this word come to you in channels, but pack your bags to be ready to go in the next week or so. Incidentally, I have had periodic requests from Mike [?Ledeen?] to assist in getting visas for [sic] Gorbanifar to come to Switzerland . . . . I have re- fused. Surely if they have any real bona fides they can get a visa in Tehran from the Swiss embassy or somewhere else. I do not intend to tell Mike any of this new info. Recommend against your doing so. Bravo Zulu. (McFarlane PROF note to North, 2/27/86, 16:02:23) North replied in the evening. Am reading things out of sequence due to fatigue. Many thanks for yr note. Have re- sponded to most of this in my reply re ex- changes-before I read this one. Yr con- cerns re Mike are shared here. WILCO re the passing of info. He means well but poses a significant problem. Nir says he has info that Mike has a financial relation- ship w/ Gorba, Nimrodi and perhaps Schwimmer. If true, this is not good. We also know that Gorba tells Mike everything and that is an additional reason to get Gorba out of the long range picture ASAP. We will still need to have him involved in the TOWs transactions since he manages the financial end for the Iraniansin [sic] Europe. We ought to sit quietly and think about how we handle Mike so that he does not start talking out of disgruntlement (if that's a word). Have asked JMP for a ses- sion vw/ you and Dick Secord as soon as possible after Dick returns tomorrow night fm Eur where he is setting up an arms de- livery for the Nic resistance. A man of many talents of Secord is. Must be off. Am supposed to make a speech on aiding the Nic resistance to a group of supporters. Best regards. North. (North PROF notes to McFarlane, 2/27/86, 20:22:22) On February 28, Poindexter told the Secre- tary of State that the hostages would be re- leased the following week. According to the Secretary of State: Poindexter reported nothing about arms. Rather, he said that the Iranians wanted a high-level dialogue, covering issues other than hostages. He said the White House had chosen McFarlane for the mission, and that he would go to Frankfurt, West Ger- many, to meet with a deputy of Rafsanjani. I .[Shultz] said fine, but asked that Mr. McFarlane be given instructions to govern his negotiations. I was shown these instruc- tions, and I was satisfied with them. Wholly independent of the hostage issue, Vice Admiral Poindexter said the Iranians had asked for help on intelligence as to what the Soviets were doing on the Iranian border and in Afghanistan. He saw a path to reemerging relations. Vice Admiral Poindexter said that the hos- tages would be released at the time Mr. McFarlane was meeting with the Iranians in Frankfurt. [T]he presumption was that, after the meeting, they were pursuing this matter, and that, as a result of pursuing it, the Ira- nians wanted the meeting, and the meeting itself, having it with a high-level person like Mr. McFarlane, the President's former advisor, was a mark of a high-level interest; and the other side of that coin was the re- lease of the hostages. It's sort of like the London proposition returning again, I thought. It seemed very unlikely to me, but I said well, if you've got that arrangement, that's great. (Shultz, SRB, 51-52) VII. Hostages and Iran Pursued: March-May 1986 By the end of February 1986, the representa- tives of the United States were disappointed by the results of negotiations with Ghorbanifar and Iranian officials. But disappointment was gilded in hope, and the effort was pursued. At this time, American policy changed with regard to terrorism. Since the terrorist bomb- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ings at the Rome and Vienna airports in De- cember 1985, the United States was prepared to use military force to affirm its rights. In March 1986, units of the Sixth Fleet undertook what was described as a routine assertion of the right of passage through the international waters of the Gulf of Sidra. In the course of that exercise, ships crossed what Qadhafi had designated a "line of death," and Libyan forces attacked them. In April, Libya directed the bombing of a West Berlin discotheque fre- quented by Americans, and, in response, Amer- ican aircraft attacked Libyan targets on April 14. A. Prologue to a McFarlane- Iranian Meeting, I: March 1986 53 Preparations for the next meeting with Irani- ans, in which McFarlane was to participate, im- mediately began when North returned from Frankfurt. Clair George, with C/NE's support, urged that George Cave join the team as inter- preter. C/NE recalled that he had told North on the way home from Frankfurt at the end of February that the government should provide an interpreter. Secord and Hakim, who is of Iranian origin, had appeared at the first and second Frankfurt meetings, respectively, with- out prior notice to C/NE. (C/NE (1) 11; C/NE (2) 76) C/NE not only believed that the gov- ernment could perform the roles assigned to ss McFarLane told the Board: I left the government and didn't hear anything more on the issue until I had a call from Admiral Poindexter in late April of this year, and he summarized that basically, that the pro- gram had been renewed and contacts re-established, and that the President had authorized quite an active dialogue and the transfer of weapons. And to make a long story short, it wasn't a long conversa- tion. He said: We believe we have an arrangement whereby they would release all of the remaining hostages, and they have agreed to start this exchange on political matters, and the President wants to know, will you undertake that political exchange. [Between the date that he reported on his December trip and Poindexter's call in April, McFarlane's contact with the Iranian question amounted to] one or two phone calls that dealt with other matters, either Lieutenant Colonel North, just kind of in a social context, but just by way of mentioning how things were going in life and professionally and so forth, I remember either it was him or it was Admiral Poindexter, I don't know saying: By the way, things aren't totally moribund on the Iranian connec- tion; we have some promise there, but without any precision. (McFarlane (1) 28-29) Secord and Hakim, but also thought Hakim had a potential conflict of interest arising from his own business relationships. (See C/NE (1) 11-12, 40) C/NE recalled that Hakim was in- volved in arms transactions "that might or might not be legal. There wasn't any prosecu- tion going against him, but there was a little suspicion . . . And North, to his credit, accept- ed that advice and we introduced George Cave." (Id. at 12)54 Cave had served in Tehran and was widely respected for his knowledge of Iran and Farsi. At this time, although retired, he was a consult- ant to the CIA. (CIA/IG Chronology 20; George 11; C/NE (1) 12; Cave 3) He had been responsible for terminating the CIA's relation- ship with Ghorbanifar in 1983, and had helped craft Ghorbanifar's polygraph examination in January 1986. (C/NE (2) 76) He joined the team on March 5. When C/NE introduced him to North, (North calendar; Cave 3), he recalled being "a little bit horrified when I found out that [Ghorbanifar] was involved in this." (Cave 5)55 On February 27, the Director of Central In- telligence met with Poindexter, George, and C/ NE, (DCI Telephone Calls and Meetings, 1-9/ 30/86); talking points were prepared on the same day for the Director, possibly for use in that meeting. Continued discussions on a very serious and important matter and I would like to suggest some guidelines: (1) The initial meeting should be explora- tory only. (2) We should provide information about the Soviet Union threat to the northern 54 On February 27, C/NE asked the CIA for alias passports for C/NE, Cave, Secord, and Hakim. On March 3, the passports were provided. Hakim never used his passport, which was re- turned on May 22. Secord's passport was returned on November 20, 1986. (CIA/IG Chronology 20). 55 In contrast, on February 20, 1986, after Ghorbanifar passed him information on preparations for a number of terrorist at- tacks, Charles Allen wrote that: "I believe we should move quick- ly to consolidate our relations with Subject [Ghorbanifar]. Al- though he exaggerates and manufactures some of his informa- tion, he has excellent contacts with Iranian officials in Tehran. He also has interesting contacts with Iranian nationals in Western Europe. I believe we would be remiss unless we begin to work with Subject and evaluate the potential of some of his associates, particularly [names deleted]. I have met [name deleted] and be- lieve that he has excellent potential." (C. Allen, "Discussions with Subject," 2/20/86) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 -- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 border, about the level and quality of Soviet arms going to Iraq, about the Soviet thrust in Afghanistan . . . . That seems like another reason for emphasizing the Soviet aspect. If the fact of the talks leak, that would be the best way to get public and Arab understanding of the discussions. (3) The contact should be direct. Israel and Gorbanifar [sic] should not be in- volved in these discussions. We can't afford any more telephone conversations which the Soviets and others can listen in on. (4) The first indispensable step is to set up a secure commo channel from the point where the talks are held or some point in that country to Western Europe where fur- ther secure conversations can be passed through to Washington. We should have this before discussions begin, and for this purpose we should fly Secord into Teheran as soon as possible. (5) The group at the meetings should be as small as possible. I recommend that it consist of McFarlane, North, [C/NE], a staffer for McFarlane, and George Cave. George Cave is an ideal interpreter. He speaks not only Farsi, but also Mullah and understands all dialects. He is a known and proven quantity. In contemplation of where these discussions could possibly go, we should avoid having a foreign interpret- er, even though the man in Switzerland is accepted and trusted.56 He should be our man. (6) These discussions ought to go forward. The President should call Prime Minister Peres, thank him, tell him we are not going to take his man to the meeting because we think it is in the best interest of the two countries not to involve them directly at this time, assure him that we have Israel's interests in mind, and will protect them and report to Peres after the meeting. (7) We need to continuously plan in case the discussions leak. The fact of discus- sions between the United States and Iran could change the whole universe. Iraqi re- 56 Probably a reference to Hakim. Ghorbanifar told the Board that Cave's Farsi was "very, very poor," probably due to disuse. (Ghorbanifar 159) sistance could weaken. The Arab world could go mad unless the discussions are carefully and adequately explained. Some element of the explanation could be: -The Soviets have been talking to both parties for years; -The Arabs would cheer if Iran could be moderated; and -Of course, we will do almost any- thing to get our hostages back. We should remember that leaking the fact of this meeting could be viewed as working to the advantage of Israel. Only four men in Israel know of the discussions-the Prime Minister, his military secretary (Neer [sic]) who attended the Frankfurt meeting and who is the Prime Minister's terrorism advisor, and Neer's boss in the Prime Min- ister's office. (DCI, Talking Points, 2/27/86) 57 At the begin- ning of March, Robert Gates, Deputy Director for Intelligence, asked that briefing materials on the Soviet threat to Iran be prepared for McFarlane's use. (CIA/IG Chronology 20) North, C/NE, and Cave travelled to Paris on March 7 to meet Ghorbanifar the next day.58 S7 Attached to the copy of these talking points in North's file was the following note in North's handwriting: -Probing for foothold -access before transition -fear of Soviets-left inside -Anti Western terrorism -Tactical success in near-term could be to our advantage in that it offers opportunity for settlement. -People who know -Shultz -Weinberger -Powell -Koch -Casey ?[C/NE] McMahon ?Allen Gates -RR -JMP -Don R[egan]. -Don F [ortier] -VP -Peter [Rodman] -Howard [Teicher]. (Handwritten note. Feb. 1986) ea Cave said the meeting took place on March 7. (Cave 5) Ac- cording to North's calendar, travel forms, and subsequent report to McFarlane, it took place on March 8. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 On his return from Paris, North reported to McFarlane. Per request from yr old friend Gorba, met w/ him in Paris on Saturday [March 8].59 He started w/ a long speech re how we were trying to cut him out, how important he is to the process and how he cd deliver on the hostages if only we cd sweeten the pot w/ some little tid-bits-like more arms, etc. After his speech I allowed as how he was not getting the message, but that I wd reiterate: -The hostages are a serious impediment to serious govt-to-govt discussions and this must be resolved before we can discuss any further transactions.-We remain ready to go to Kish [Island] or anywhere else to dis- cuss issues of mutual concern as long as the hostages are going to be- released during or before this meeting.-The real problem facing Iran-that of Soviet inter- vention was becoming a reality and the Ira- nians are in no position to deal w/ this problem. We can help-and are willing to because a free, independent, Iran is in our best interests. Unless the hostage issue is resolved quickly and favorably, U.S./Irani- an cooperation on opposing the Soviets is out of the question. Much more said in this respect, but you have the essence. Bob Gates has assembled a nice amt of intel on the Soviet threat . . . . There does indeed seem to be a growing awareness in the USSR that their Iraqi friends are having their asses handed to them and that the situation in Afghani- stan is getting worse, not better.. . . (North PROF note to McFarlane, 3/10/86, 21:10:24) 60 59 According to Cave, Nir proposed the meeting "to see what we could salvage" after the meeting with the official from the Ira- nian PM's office in February. (Cave 5) On March 4, Ghorbanifar called Charles Allen, among other things, to suggest that he es- tablish a "'continuing relationship' " with Allen and the CIA. (C. Allen, "Conversation with Subject, 4 March 1986," 3/6/86. CIA Docs.) 80 In the same message, North asked McFarlane's advice about an opportunity to return to the Marine Corps. McFarlane replied that the two should discuss it. He added: Frankly, I would expect the heat from the Hill to become im- mense on you by summer. Consequently, it strikes me as wise that you leave the White House. At the same time, there will be no one to do all (or even a small part of what) you have Cave recalled that, in Paris, Ghorbanifar pur- ported to communicate Iran's present position. He indicated that Tehran was "prepared to do something to get additional hostages released" and was interested in pursuing a political dis- cussion with the United States. (Cave 6) Ghor- banifar presented "a list of 240 line items for HAWK spare parts. This was basically what transpired at that meeting." (Id.) Cave remem- bered much discussion about why no hostages had been released after the delivery of 1,000 TOWS, but no explanation-"just the proposal that the Iranians had indicated to Ghorbanifar that they would be interested in opening nego- tiations with the United States, both on the po- litical side and the strategic side. The one spe- cific area that was first discussed at this meet- ing was Afghanistan." (Id.) C/NE recalled frustration after the Paris meet- ing. We had delivered our missiles and the shoe was on their foot, but they were acting like the shoe was still on our foot. Ghorbanifar came to that meeting and said, well, they've decided they didn't want TOWS after all. So the TOWs don't count. What we need now are HAWK spare parts; we don't need any more TOWS. We want HAWK spare parts. And he presented us a list of HAWK spare parts he needed. So, you know, it's a bag of worms. I was present when North briefed Poindexter after that meeting, and Poindexter at that point was fed up and wanted to just cut if off entirely, forget it. It wasn't going anywhere. (C/NE (1) 20) As C/NE noted, the program was not cut off. Based in part, at least, on reports from Cave, who worked under his direction, C/NE re- called: done. And if it isn't done, virtually all of the investment of the past five years will go down the drain. How's this for a self-serving scenario: 1. North leaves the White House in May and takes 30 days leave. 2. July 1st North is assigned as a fellow at the CSIS and (lo and behold) is as- signed to McFarlane's office. 3. McFarlane/North continue to work the Iran account as well as to build other clandestine ca- pabilities so much in demand here and there. Just a knee jerk musing. (McFarlane PROF note to North, 3/10/86, 22:14:24) B-82 - - Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 There was a lot of discussion essentially to try to figure out a way to get Ghorbanifar out of it and, North, who you must have sensed by now is a man of a lot of energy and a lot of determination, essentially kept it alive because of the President's personal and emotional interest in getting the hos- tages out-in my view. The political reality of this thing was it would be very nice if you could get a stra- tegic thing done, a real improvement, a real change in Iranian relations, a securing of Iran, again as having a relationship with the U.S. and denied to the Soviets. All that was fine. But the real thing that was driv- ing this was that there was in early '86, late '85, a lot of pressure from the hostage families to meet with the President and there were articles in the magazines about the forgotten hostages, and there were a lot of things being said about the U.S. Government isn't doing anything, not doing anything. And, of course, what is being done is we are desperately trying to keep secret. And there is a lot of fear about the yellow rib- bons going back up and that this President would have the same problems that the last President had had with Iranian hostages, Iranian control. We learned as time went on that the Iranians didn't fully control these hostages, but as it was being por- trayed until Ghorbanifar got out of it there wasn't any question that we could get all those hostages out through the Iranians. We had tried to do the same with the Syr- ians. We had tried the same through the Algerians.... There had been several em- issaries sent secretly to see Assad. There were a lot of nice words said by Assad, but he never lifted a finger, not once. On at least two occasions we told the Syr- ians precisely where those hostages were and the Syrians said we'll do our best to see if we can find these people, and we certainly are going to make sure that noth- ing is done so that they are harmed as we try to rescue them. But we'll try to get them out right now. But we had intelli- gence that they weren't doing anything. Nice words, but no action. So an enormous amount of frustration that there wasn't any other way and that there was an enormous amount of intelligence consistent from the time that Buckley was taken that the captors wanted to have an exchange, that the Kuwaitis would have to release the Dawa prisoners in Kuwait, the ones who were involved in the bombings there in December of '83, and that nothing else would work to get those hostages re- leased. And that was true until this channel released Weir. (Id. at 21-23) Prior to the March Paris meeting, Ghorbani- far received word from his Tehran contact that he was having difficulty persuading his govern- ment colleagues to respond positively to the delivery of 1,000 TOWs. He insisted that Iran needed 100 surface-to-air missiles but Iran would not accept more HAWKs of the type shipped in November. It was apparent that Ghorbanifar and his Tehran contact had dis- cussed other arms deliveries as well. 61 McFarlane was concerned by North's reports about the meeting in Frankfurt. He wrote late on March 10: I guess I'm a little puzzled about the Irani- an wiring diagram. From whom are we get- ting the word concerning a meeting in the Gulf? Is Gorba involved in that dialogue or is that info coming through the Israelis? It strikes me that it is probably OK to keep Gorba in the dark-to the extent that is possible to do if there is another channel. Gorba is basically a self-serving mischief maker. Of course the trouble is that as far as we know, so is the entire lot of those we are dealing with. The Soviet threat is the strategic menace and I would guess that they would like to avoid having the Rus- sians in Iran. But it is going to take some time to get a feel for just who the players 61 On March 9, Ghorbanifar called Charles Allen, reporting, among other things, that the Paris meetings had been successful, although additional effort remained. Allen thought Ghorbanifar "seemed unusually subdued and less sanguine than in previous conversations." (C. Allen, "Conversation with Subject," 3/11/86. CIA Docs.) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 are on the contemporary scene in Teheran [sic]. So the sooner we get started the better. (McFarlane PROF note to North, 3/10/86, 22:14:24) On March 11, North answered McFarlane: [Ghorbanifar] is aware of the Kish mtg and is basically carrying our water on the mtg since he is still the only access we have to the Iranian political leadership. It wd be useful, I believe, for you to talk w/George Cave, the Agency's Iran expert. He shares our concern that we may be dealing only w/ those who have an interest in arms sales and their own personal financial gain. . . . Will advise. If you wd like to meet w/ George, pis let me know and I will ar- range. (North PROF note to McFarlane, 3/11/86, 07:23:34) On March 11, Poindexter told the Secretary of State "that this arrangement [a McFarlane-Iranian meeting in Frankfurt] had fallen through, apparently because Mr. McFar- lane objected to the idea." (Shultz, SRB, 52) Just before North, C/NE, and Cave went to Paris, Howard Teicher, who at that time was working on Libyan matters, again became in- volved in the matter. C/NE told him in the last week of February "I hope you're getting a lot of rest, you're really going to be tired." (Teicher 16) Teicher subsequently met with Fortier, Rodman, and North. He "was briefed orally on the President's January 17 finding, and advised that [he] would be providing staff support to Mr. McFarlane, travelling with him to Tehran, when the arrangements were com- pleted that would permit a delegation to travel to Iran for meetings with the senior Iranian leadership." (Id. at 17) Teicher recalled being informed in general terms about a shipment of TOWs, "a joint operation with the Government of Israel," and that the Finding specified that Congress would not be informed at this time. He remembered remarking that he understood Congress was normally informed and being told that the Attorney General believed excep- tions were permitted, as in this case. Teicher was instructed to work with Rodman and North on terms of reference for McFar- lane's use, and submit them to Fortier. (Id. at 17-18) Teicher later submitted a draft of terms of reference to North. (Teicher 2). An un- signed, undated draft document may be this draft (original spelling and grammar): We are concerned with three problems of mutual interest: 2. Soviets. The Soviets are deeply con- cerned about the possibility of an Ira- nian military victory in Iraq. The 1972 treaty of friendship between Iraq and the USSR calls for consultation be- tween the two powers when Iraqi terri- tory is threatened by hostile military action. The wording of this treaty is not specific so the Soviets have consid- erable latitude in deciding on actions to on the actions to take in their own interests. . . . The Soviets see the col- lapse of Iraq as greatly weakening their influence in the Arab Middle East. To date the Soviets have shied away from direct military assistance, but they have keep [sic] open the military supply line to Iraq. They have also in- creased their intelligence support to Iraq. This was particularly apparent during the Val fajr 8 offensive. Further Iranian successes in its war with Iraq might lead to Soviet military moves along the Iranian border. These moves would be the threatening type in hopes of drawing off Iranian troops from the Iraqi front.. . . 3. Syria. The Syrians are concerned about the consequences of an Iranian victory in Iraq. They see the inevitabil- ity of a clash of interests in Lebanon between the Syrians and the Shiah. An Iranian victory in Iraq will strengthen Shiah resolve in Lebanon. The Syrians also do not want a fundamentalist Is- lamic state in Iraq. Assad has been trheatened [sic] by fundamentalist movements in Syria in the past and has been forced to deal very harshly with them. The bombardment of Hama being the best example. Syria would like to see Iraq weak, but not overrun by Iran. Assad is already being forced to consider the possibility that relations with Iran are going to Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 - Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 become strained at some point in the future. Syria's most immediate con- cerned [sic] is its growing problem with the Hizbullah movement in Leba- non.. . . B. Prologue to a McFarlane- Iranian Meeting, II: April-May 1986 The exchanges of fire with Libya in March and April 1986 complicated, but did not inter- rupt, attempts to schedule a meeting between McFarlane and important officials of the Irani- an government. Toward the end of March, Ghorbanifar travelled to Tehran, North report- ed to McFarlane on March 20, "and returned with a proposed meeting scenario that is being communicated to us thru the Israeli, Nir, fm Peres' office. Still don't have details yet since his secure comms down, but should have nec- essary info tomorrow." (North PROF note to McFarlane, 3/20/86, 07:21:03. 1986 PROF notes) 62 On March 25: The Iranian official in the PM's office] called the phone drop that Dick Secord had given him. Al Hakim, who [sic] we passed off as a "White House interpreter" at the Frankfurt mtg. spoke to [the official] twice yesterday [March 25]. The bottom line of the calls is that [the Iranian official] wd like to have us meet w/ the Iranian side next week at Kharg Island. Supposedly, during the mtg the hostages wd be re- leased and we wd immediately start deliv- ering the 3k TOWs and agree at the mtg to the delivery of spare parts which they desperately need. They profess to be very concerned about the nature of the Soviet threat and want all we can give them on that score. Not sure at this point how real this offer is, but he says Rafsanjani wd 62 Ghorbanifar went to Tehran on March 13, "at some person- al risk," returning to France on the 17th. (C. Allen, "Conversa- tion with Subject," 3/12/86. CIA Docs.) On March 20, Ghorbani- far told Allen he had briefed Nir ("Adam") on his meetings with the Iranian Prime Minister, Rafsanjani, and Ahmad Khomeini (the Ayatollah's son). He reported that the Ayatollah remained "very ill"; that the Prime Minister had uncovered Soviet penetra- tion of his office; that he was sending a report to North, which would include some requirements from the Iranian military; and that he hoped a meeting of principals could take place soon. (C. Allen, "Conversation with Subject," 3/21/86) come as the head of the Iranian side. If this looks like a go-and we shd know more tomorrow when the next phone call is scheduled-how are you for travel during the week of 31 Mar-4Apr? (North PROF note to McFarlane, 3/26/86, 09:19:12) In part to work on scheduling, Ghorbanifar came to the United States at the beginning of April.63 At the end of March and beginning of April, Ghorbanifar complained to Charles Allen and Nir about two calls from Hakim in which Hakim claimed to speak for the President. Ac- cording to Ghorbanifar, Hakim said that there was no longer any reason for Ghorbanifar to be involved. (C. Allen, "Conversation with Sub- ject," 4/2/86. CIA Docs.) Partly to reassure him, North invited Ghorbanifar to the United States on an urgent basis. He came on April 3, by Concorde. On April 7, North reported the meeting to McFarlane. Met last week w/ Gorba to finalize ar- rangements for a mtg in Iran and release of hostages on or about 19 Apr. This was based on word that he had to deposit not less than $15M in appropriate acct. by close of banking tomorrow. Have talked at length w/ Nir who is handling him on thie [sic] bank xfer and Nir believes that Gorba may be having trouble closing the final ar- rangements back home. Per request of JMP have prepared a paper for our boss which lays out arrangements. Gorba indicated that yr counterpart in the T[ehran] mtg wd be Rafsanjani. If all this comes to pass it shd be one hell of a show. Meanwhile we have some evidence that Col Q. [Qadhafi] is attempting to buy the hostages in order to stage a propaganda extravaganza. As far fetched as this may seem, CIA believes it is a distinct possibility. Bottom line: believe 63 In a series of telephone conversations with Ghorbanifar and Nir, March 24-April 2, Charles Allen learned that Ghorbanifar was under pressure in Tehran; that he was passing through a dif- ficult period financially, but that the Israelis were helping him; that an important meeting would occur on March 29,. at which Khomeini himself would be informed of the state of play with the United States; and that, after that meeting, Ghorbanifar had "ex- cellent news" for North. An NSC consultant reported to Allen that Ghorbanifar was upset in part because his California girl- friend's house had been entered, as had Furmark's office in New York. Ghorbanifar blamed the CIA. (C. Allen, Memoranda for the Record, 3/24, 3/28, 3/28, 3/31, 4/2/86) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 you slid avail yrself of this paper @ yr ear- liest convenience. Wd like to see you anyway. Am going home-if I remember the way. (North PROF note to McFarlane, 4/7/86, 23:18:58) Cave recalled meeting Ghorbanifar on April 3-4 with Charles Allen, C/NE, and North. Ghorbanifar reported that the Iranians now proposed a meeting. According to Ghorbanifar, "the Iranians were looking at the hostage situa- tion and hoping that they could get all the hostages released in return for consideration on arms, specifically the HAWK missiles and the HAWK missile parts and the TOWs." (Cave 6-7) The Americans gave him a list of available HAWK spare parts. Now, on the pricing, the way we handled the pricing is we calculated up all our costs, and this included the cost of the items, whatever shipping costs we had to pay for packing, guards, what have you, and we would give this figure to Colonel North. (Id.) North's memorandum for Poindexter to for- ward to the President reviewed the negotiations and specified how the profits on the sale of weapons to Iran could be spent. The Board has obtained no evidence that Poindexter showed this memorandum to the President. Background.-In June 1985, private Ameri- can and Israeli citizens commenced an op- eration to effect the release of the Ameri- can hostages in Beirut in exchange for pro- viding certain factions in Iran with U.S.- origin Israeli military materiel. By Septem- ber, U.S. and Israeli Government officials became involved in this endeavor in order to ensure that the USG would: -not object to the Israeli transfer of em- bargoed material to Iran; -sell replacement items to Israel as re- plenishment for like items sold to Iran by Israel. On September 13, the Israeli Government, with the endorsement of the USG, trans- ferred 508 TOW missile to Iran. Forty- eight hours later, Reverend Benjamin Weir was released in Beirut. Subsequent efforts by both governments to continue this process have met with frus- tration due to the need to communicate our intentions through an Iranian expatri- ate arms dealer in Europe. In January 1986, under the provisions of a new Covert Action Finding, the USG demanded a meeting with responsible Iranian govern- ment officials. On February 20, a U.S. Government offi- cial. met with an official in the Iranian Prime Minister's office-the first direct U.S.-Iranian contact in over five years. At this meeting, the U.S. side made an effort to refocus Iranian attention on the threat posed by the Soviet Union and the need to establish a longer term relationship be- tween our two countries based on more than arms transactions. It was emphasized that the hostage issue was a "hurdle" which must be crossed before this im- proved relationship could prosper. During the meeting, it also became apparent that our conditions/demand had not been accu- rately transmitted to the Iranian govern- ment by the intermediary and it was agreed that: -The USG would establish its good faith and bona fides by immediately providing 1,000 TOW missiles for sale to Iran. This transaction was covertly completed on February 21, using a private U.S. firm and the Israelis as in- termediaries. -A subsequent meeting would be held in Iran with senior U.S. and Irani- an officials during which the U.S. hos- tages would be released. -Immediately after the hostages were safely in our hands, the U.S. would sell an additional 3,000 TOW missiles to Iran using the same procedures em- ployed during the September 1985 transfer. In early March; the Iranian expatriate in- termediary demanded that Iranian condi- tions for release of the hostages now in- cluded the prior sale of 200 PHOENIX missiles and an unspecified number of HARPOON missiles, in addition to the Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 3,000 TOWs which would be delivered after the hostages were released. A subse- quent meeting was held with the interme- diary in Paris on March 8, wherein it was explained that the requirement for prior deliveries violated the understanding reached in Frankfurt on February 20, and were [sic] therefore unacceptable. It was further noted that the Iranian aircraft and ship launchers for these missiles were in such disrepair that the missiles could not be launched even if provided. From March 9 until March 30, there was no further effort undertaken on our behalf to contact the Iranian Government or the intermediary. On March 26, [the official in the Prime Minister's office] made an unso- licited call to the phone-drop in Maryland which we had established for this purpose. [He] asked why we had not been in contact and urged that we proceed expeditiously since the situation in Beirut was deteriorat- ing rapidly. He was informed by our Farsi- speaking interpreter that the conditions re- quiring additional materiel beyond the 3,000 TOWs were unacceptable and that we could in no case provide anything else prior to the release of our hostages. [The Iranian official] observed that we were cor- rect in our assessment of their inability to use PHOENIX and HARPOON missiles and that the most urgent requirement that Iran had was to place their current HAWK missile inventory in working condition. In a subsequent phone call, we agreed to dis- cuss this matter with him and he indicated that he would prepare an inventory of parts required to make their HAWK sys- tems operational. This parts list was re- ceived on March 28, and verified by CIA. Current Situation.-On April 3, Ari Gorbani- fahr [sic], the Iranian intermediary, arrived in Washington, D.C. with instructions from. [his Tehran contact] to consummate final arrangements for the return of the hos- tages. Gorbanifahr was reportedly enfran- chised to negotiate the types, quantities, and delivery procedures for materiel the U.S. would sell to Iran through Israel. The meeting lasted nearly all night on April 3- 4, and involved numerous calls to Tehran. A Farsi-speaking CIA officer in attendance was able to verify the substance of his calls to Tehran during the meeting. Subject to Presidential approval, it was agreed to pro- ceed as follows: -By Monday, April 7, the Iranian Government will transfer $17 million to an Israeli account in Switzerland. The Israelis will, in turn,. transfer to a private U.S. corporation account in Switzerland the sum of $15 million. -On Tuesday, April 8 (or as soon as the transactions are verified), the pri- vate U.S. corporation will transfer $3.651 million to a CIA account in Switzerland. CIA will then transfer this sum to a covert Department of the Army account in the U.S. -On Wednesday, April 9, the CIA will commence procuring $3.651 mil- lion worth of HAWK missile parts (240 separate line items) and transfer- ring these parts to . . . This process is estimated to take seven working days. -On Friday, April 18, a private U.S. aircraft (707B) will pick-up the HAWK missile parts at . . . and fly them to a covert Israeli airfield for preposition- ing (this field was used for the earlier delivery of the 1000 TOWs). At this field, the parts will be transferred to an Israeli Defense Forces' (IDF) air- craft with false markings. A SATCOM capability will be positioned at this lo- cation. -On Saturday, April 19, McFarlane, North, Teicher, Cave, [C/NE], and a SATCOM communicator will board an aircraft in Frankfurt, Germany, en- route [sic] to Tehran. -On Sunday, April 20, the following series of events will occur: -U.S. party arrives Tehran (A- hour)-met by Rafsanjani, as head of the Iranian delegation. -At A+7 hours, the U.S. hos- tages will be released in Beirut. -At A+ 15 hours, the IDF aircraft with the HAWK missile parts Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 aboard will land at Bandar Abbas, Iran. Discussion.-The following points are rele- vant to this transaction, the discussions in Iran, and the establishment of a broader relationship between the United States and Iran: -The Iranians have been told that our presence in Iran is a "holy com- mitment" on the part of the USG that we are sincere and can be trusted. There is great distrust of the U.S. among the various Iranian parties in- volved. Without our presence on the ground in Iran, they will not believe that we will fulfill our end of the bar- gain after the hostages are released. -The Iranians know, probably better than we, that both Arafat and Qhad- haffi are trying hard to have the hos- tages turned over to them. Gorbani- fahr specifically mentioned that Qhad- haffi's efforts to "buy" the hostages could succeed in the near future. Fur- ther,. the Iranians are well aware that the situation in Beirut is deteriorating rapidly and that the abilitiy of the IRGC [Iranian Revolutionary Guard Corps] to effect the release of the hos- tages will become increasingly more difficult over time. -We have convinced the Iranians of a significant near term and long range threat from the Soviet Union. We have real and deceptive intelligence to dem- onstrate this threat during the visit. They have expressed considerable in- terest in this matter as part of the longer term relationship. -We have told the Iranians that we are interested in assistance they may be willing to provide to the Afghan re- sistance and that we wish to discuss this mattter in Tehran. -The Iranians have been told that their provision of assistance to Nicara- gua is unacceptable to us and they have agreed to discuss this matter in Tehran. -We have further indicated to the Iranians that we wish to discuss steps leading to a cessation of hostilities be- tween Iran and Iraq. . -The Iranians are well aware that their most immediate needs are for technical assistance in maintaining their air force and navy. We should expect that they will raise this issue during the discussions in Tehran. Fur- ther conversation with Gorbanifahr on April 4, indicates that they will want to raise the matter of the original 3,000 TOWs as a significant deterrent to a potential Soviet move against Iran. They have also suggested that, if agreement is reached to provide the TOWs, they will make 200 out of each 1,000 available to the Afghan resist- ance and train the resistance forces in how to use them against the Soviets. We have agreed to discuss this matter. -The Iranians have been told and agreed that they will receive neither blame nor credit for the seizure/re- lease of the hostages. -The residual funds from this trans- action are allocated as follows: -$2 million will be used to pur- chase replacement TOWs for the original 508 sold by Israel to Iran for the release of Benjamin Weir. This is the only way that we have found to meet our commitment to replenish these stocks. -$12 million will be used to pur- chase critically needed supplies for the Nicaraguan Democratic Resistance Forces. This materiel is essential to cover shortages in re- sistance inventories resulting from their current offensives and Sandi- nista counter-attacks and to "bridge" the period between now and when Congressionally-ap- proved lethal assistance (beyond the $25 million in "defensive" arms) can be delivered. The ultimate objective in the trip to Tehran is to commence the process of im- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 proving U.S.-Iranian relations. Both sides are aware that the Iran-Iraq War is a major factor that must be discussed. We should not, however, view this meeting as a ses- sion which will result in immediate Iranian agreement to proceed with a settlement with Iraq. Rather, this meeting, the first high-level U.S.-Iranian contact in five years, should be seen as a chance to move in this direction. These discussions, as well as follow-on talks, should be- governed by the Terms of Reference (TOR) (Tab A) with the recognition that this is, hopefully, the first of many meetings and that the hostage issue, once behind us, improves the opportunities for this relationship. Finally, we should recognize that the Irani- ans will undoubtedly want to discuss addi- tional arms and commercial transactions as "quids" for accommodating our points on Afghanistan, Nicaragua, and Iraq. Our em- phasis on the Soviet military and subver- sive threat, a useful mechanism in bringing them to agreement on the hostage issue, has also served to increase their desire for means to protect themselves against/deter the Soviets. RECOMMENDATION That the President approve the structure depicted above under "Current Situation" and the Terms of Reference at Tab A. Approve -- Disapprove -- (Unsigned, undated memorandum, "Release of American Hostages in Beirut.") The following "Terms of Reference" for a "U.S.-Iran Dialogue" were attached: 1. BASIC PILLARS OF U.S. FOREIGN POLICY -President Reagan came into office at a time when Iran had had a certain impact on the American political process-perhaps not what you intended. -The President represented and em- bodied America's.- recovery from a period. of weakness. He has rebuilt American mili- tary and economic strength. -Most important, he has restored Ameri- can will and self-confidence. The U.S. is not afraid to use its power in defense of its interests. We are not intimidated by Soviet pressures, whether on arms control or Angola or Central America or Afghanistan. -At the same time, we are prepared to re- solve political problems on the basis of reciprocity. -We see many international trends-eco- nomic, technological, and political-work- ing in our favor. II. U.S. POLICY TOWARD IRAN: BASIC PRINCIPLES A. U.S. Assessment of Iranian Policy -We view the Iranian revolution as a fact. The U.S. is not trying to turn the clock back. -Our present attitude to Iran is not_ a product of prejudice or emotion, but a clear-eyed assessment of Iran's present policies. -Iran has used "revolutionary Islam" as a weapon to undermine pro-Western govern- ments and American interests throughout the Middle East. As long as this is Iran's policy, we are bound to be strategic adver- saries. -Support for terrorism and hostage-taking is part of this strategic pattern. We see it used not only against us, but against our friends. We cannot accept either. Your in- fluence in achieving the release of all hos- tages/return of those killed (over time) is essential. -We see your activity in many parts of the world, including even Central America. -The U.S. knows how Iran views the Soviet Union. But subversion of Western interests and friends objectively serves Soviet interests on a global scale. -Thus, our assessment is that a decisive Iranian victory in the war with Iraq would only unleash greater regional instability, a further erosion of the Western position, and enhanced opportunities for Soviet trouble-making. -The U.S. will therefore do what it can to prevent such a development. We regard the war as dangerous in many respects and would like to see an end to it. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 B. Possible Intersection of U.S.-Iranian Inter- ests -Despite fundamental conflicts, we per- ceive several possible intersections of U.S. and Iranian interests. I propose to explore these areas. -First, the U.S. has had a traditional inter- est in seeing Iran preserve its territorial in- tegrity and independence. This has not changed. The U.S. opposes Soviet designs on Iran. -Second, we have no interest in an Iraqi victory over Iran. [Discussion of US-Iraq Relationship] We are seeking an end to this conflict and want to use an improved relationship with Iran to further that end. -Third, we have parallel views on Afghan- istan. Soviet policy there is naked aggres- sion, a threat to all in the region. Our mutual friends-China and Pakistan-are threatened. We have ties with different ele- ments of the Mujahideen. But our objec- tive is the same: the Soviets must get out and let the Afghan people choose their own course. C. U.S. Objective Today -We have no illusions about what is possi- ble in our bilateral relations. Perhaps this meeting will reveal only a limited, momen- tary, tactical coincidence of interests. Per- haps more. We are prepared either way. -In essence, we are prepared to have whatever kind of relationship with Iran that Iran is prepared to have with us. III. SOVIET MILITARY POSTURE -[Discussion of Soviet interests in Iran] -Afghanistan illustrates the price the Sovi- ets are ready to pay to expand areas under their direct control. -Summarize Soviet capabilities along border and inside Afghanistan which could threaten Tehran. - U.S. is aware of Soviet activity in Balu- chistan, air strikes. -Iranian support to Sandinista regime in Nicaragua aids and abets Soviet designs- makes U.S.-Iranian relationship more diffi- cult ($100 million in oil last year, plus arms). -U.S. can help Iran cope with Soviet threat. IV. AFGHANISTAN -[Discussion of situation in Afghanistan] V. HARDWARE -We may be prepared to resume a limited supply relationship. -However, its evolution and ultimate scope will depend on whether our conver- gent or our divergent interests come to loom larger in the overall picture. -What does Iran want? ("Terms of Reference U.S.-Iran Dialogue," 4/4/86) 64 Ghorbanifar conveyed the Iranian response to Allen on April 8. He said "he had `good news', asserting that an agreement had been reached in accordance with Washington's wishes." (C. Allen, "Conversation with [Ghor- banifar]," 4/8/86) He claimed to be "working the problem through Line One adherents, i.e. those conservative elements within the Iranian Government that are concerned over the Sovi- ets and who do not believe that the clerics should necessarily be in charge of all govern- ment activities." (Id.) During April, other activities, including the strike against Libya, occupied the attention of those responsible for the Iran operation. 84 Teicher prepared the draft terms of reference and submitted it to North and Rodman, "and they worked on it." (Teicher 18) On April 22, a United States Customs operation resulted in the arrest of 17-18 arms dealers, including Ghorbanifar, allegedly violating the embargo with Iran. Ghorbanifar was held only brief- ly. (CIA/IG Chronology 22) On April 25, Charles Allen set forth his own views as to the parties' desiderata. He thought the Irani- ans urgently needed weapons; wanted a source of continuing supply; a favorable end to the Iraq war; and "re-establishment of their 'rightful place' and spread of fundamentalism," in that order. He noted that the United States refused to supply HAWK radars, which Iran has demanded, and had imposed a termination date 2-3 weeks hence if the operation had not succeeded. He thought that, unless the United States were "willing to sweeten the pot, we can only stand fast and present to them the appear- ance that time is on our side and not on theirs. This would re- quire resolve on our part in the face of possible damage to one or more hostages." The Israelis could solve the problem of con- tinuing supply to Iran by the United States committing a sin of ommission. (C. Allen, Working Paper, 4/25/86) Allen sent this paper to North on April 26. (C. Allen 15; CIA/IG. Chronology 22) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Progress toward the long-promised high-level meeting with representatives of the Iranian government was slow. On April 16, North wrote Poindexter that: Recognize that all are very busy. Have been unable to get thru to you or Don [Fortier] via phone/appointment. [C/NE] and Gates have urged that Cave and North proceed tomorrow to meet with [the Irani- an official] and Gorba in Frankfurt on Friday, and return to Washington on Sat- urday. All this based on a series of phone calls btwn Gorba/[the Iranian official]; North/Nir; Nir/Gorba; Allen/Gorba over the last 72 hours.65 In order to arrive for a Friday mtg Cave/North- wd fly out tomor- row night to arrive Friday a.m. No deposit has been made yet because Nir does not want to risk losing the money if the oper- ation is not going to go to closing. He doesn't need the 240 parts. We have a problem on our side in that over 50 of the parts now do not appear to be in stock or are no longer made for our version of the system. Nir is checking in their older in- ventories to see if they have them on hand. Please advise soonest, must make reserva- tions. (North PROF note to Poindexter, 4/16/86, 16:40:45) Poindexter replied: You may go ahead and go, but I want sev- eral points made clear to them. There are not be be any parts delivered until all the hostages are free in accordance with the plan that you layed out for me before. None of this half shipment before all are released crap. It is either all or nothing. Also you may tell them that the President is getting very annoyed at their continual stalling. He will not agree to any more changes in the plan. Either they agree fi- nally on the arrangements that have been discussed or we are going to permanently cut off all contact. If they really want to save their asses from the Soviets, they should get on board. I am beginning to 65 The NSC staff and CIA officers involved in the initiative learned at this time that the Iranian official's instructions to Ghorbanifar were that, if the U.S. did not deliver all the HAWK spares with the arrival of the U.S. delegation, only one hostage would be released. It was presented to Ghorbanifar as a "take it or leave it" proposition to the U.S. suspect that [the official in the PM's office] doesn't have much authority. (Poindexter PROF note to North, copy to Thompson, 4/16/86, 21:08:42) The President said he had no knowledge of the diversion prior to his conversation with At- torney General Meese on November 25, 1986. No evidence has light to suggest oth- erwise. Contemporaneous Justice Department staff notes of North's interview with the Attor- ney General on November 23, 1986, show North telling the Attorney General that only he, McFarlane, and Poindexter were aware of the diversion. North reported the last days' activities to McFarlane on April 21. Both Charlie Allen and Nir have been in touch w/ Gorba in an effort to set up a meeting with [the Iranian official] in Europe. We know that [the Iranian official] is apparently trying to extract additional concessions from us prior to releasing the Americans. George Cave, our resident expert believes that [the Iranian official] had probably received some kind of au- thority to cause the release of the hostages prior to our Libyan action and that, the current delays and efforts to force new concessions are a consequence of internal disputes over what the Iranians shd do about this matter in the wake of the U.S. action in Libya. Gorba has been out of touch all day and Cave/North cancelled the trip to Frankfurt for a second time be- cause we do not want to meet again w/ only, Gorba. The Kilburn tragedy has us very concerned because there appears to be some possibility of Syrian complicity in Kilburn's death and the same could happen to our other hostages if the Syrians are able to put their hands on them. If the mtg takes place this week it would still be a minimum of eight and a maxi- mum of 10 days from deposit of funds before we can assemble the requisite parts. We do not believe they will make this de- posit until after the mtg. We also need to make it known that we simply do not have some of the parts requested since we have modernized our HAWK systems. I have sent Nir a coded msg asking him to deter- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 mine whether or not they have in stock the items which we lack. If it is determined that they do not have them we will have to determine the effect this will have on the understanding we reached last week w/ Gorba. Nir believes that the Israelis will be able to give us an answer in the next 2 days. Cave and North are prepared to lunch again tomorrow if Gorba surfaces and has set up a mtg w/ [his Tehran con- tact]. Bottom line: earliest timeframe for RCM/Cave/North trip to Iran is 30 April and this will slip a day for every day of delay in the Frankfurt mtg & its comple- mentary financial transaction. (North PROF note to McFarlane, 4/21/86, 20:31:28) Poindexter transmitted North's note to McFarlane and added the following cover: [The Iranian official] wants all of the HAWK parts delivered before the hostages are released. I have told Ollie that we can not do that. The sequence has to be 1) meeting; 2) release of hostages; 3) delivery of HAWK parts. The President is getting quite discouraged by this effort. This will be our last attempt to make a deal with the Iranians. Next step is a Frankfurt meeting with Gorba, [the Iranian official], North and Cave. Sorry for the in- convenience. (Poindexter PROF note to McFarlane, 4/21/86, 20:31) McFarlane agreed with Poindexter's out- line. "Your firmness against the recurrent at- tempts to up the ante is correct," McFarlane responded. "Wait them out; they will come round. I will be flexible." (McFarlane PROF note to Poindexter, 4/22/86, 20:35:17) In North's view, the situation warranted con- tinued pursuit of the meeting and consumma- tion of the transaction. He received support from Major Julius Christensen, a member of the Director of Central Intelligence/Hostage Location Task Force. On April 24, Christensen sent North an analysis of options to secure the release of the hostages. On balance, he con- cluded that "the back channel initiative" could succeed. But he noted that arms shipments could affect the balance in the Iran-Iraq war and that the longer the operation lasted the greater the risk of exposure. He attached a fuller analysis of the options-doing nothing, diplomatic efforts, Waite, paying ransom, and using force, unilaterally or multilaterally. He looked to the NSC for guidance. (Christensen to North, 4/24/86) In turn, North wrote Poin- dexter on April 29: We are seeing increasing evidence of Libyan efforts to buy the hostages and other signs of increasing disarray inside Lebanon. Further, there is increasing indi- cation of seepage around the edge of our hostage project. Bottom line: [the Iranian official] knows this and wants to proceed quickly with a, release. [Available informa- tion indicates that [the Iranian official] does indeed have the requisite authorities to bring this all to a conclusion. We are, at this point concerned only that he may be unable to proceed because of the two radars issue and that the timing of their delegation to Beirut should be such that the delegation is already there by- the time we arrive in Tehran-and that they not wait to dispatch it until we arrive. Casey and company believe that we have made too big a deal over the radars issue noting that they were proposed with the original parts list and we should not be treating them as separate items. They note that no one else sees them as such and that I should not have presented them as sepa- rate items. They believe that we can order them up from the normal logistics acquisi- tion process that they have established with the Army and that they will simply be de- livered as they are made available. In any event-all. here agree that Cave, North and Nir ought to go to meet w/ [the Iranian of- ficial]. Agency has prepared foreign Docu- ments as necessary. If you approve, we wd depart Thurs p.m. [May 1], commercial to Frankfurt then to Tehran Friday via private jet over Turkey. If you do not believe that we can proceed with the radars I will try to convince them to take what we have in terms of parts and if necessary some of the TOWs as acceptable alternatives. We know ... that Gorba has tried, unsuccessfully to date, to convince [the Iranian official] that this is the preferred course of action. (North PROF note to Poindexter, 4/29/86, 19:46:06) According to the CIA Inspector Gen- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 eral, the NSC staff and CIA received word that Iran would welcome a high-level American del- egation to Tehran. (CIA/IG Chronology 22) At this time, the Secretary of State again heard that the operation had not died. While at the Tokyo economic summit, Under Secretary Armacost cabled a report from Ambassador Price in London about Khashoggi's efforts to interest Tiny Rowlands, a British entrepreneur, in the transactions with Iran. Rowlands met with Khashoggi, Nir, and Ghorbanifar. Nir out- lined the plan, indicating that the shipment of spare parts and weapons to Iran . . . Nir and Khashoggi told Rowlands [t]he scheme, moreover, was okay with the Americans. It had been cleared with the White House. Poindexter allegedly is the point man. Only four people in the U.S. government are knowledgeable about the plan. The State Department has been cut out. (Armacost to Shultz (State cable), 5/3/86) The Secretary of State recalled that: That same day, I sought out Vice Admiral Poindexter with the President's party, but found Mr. Regan. That is, I got this in the morning. We were in the midst of these meetings. You know how they are. And I read this thing. So I am in one part of the hostel; the President and his staff-Regan, Poindexter, and so on-are in another part. So I just marched over to their wing of the hotel to find whoever I could find, and I wound up finding Don Regan. Everybody else I could not get to. I told Mr. Regan and I showed him this-I said that he should go to the President and get him to end this matter once and for all. I opposed dealing with people such as those identified in the message and said it would harm the President if the activity continued. Mr. Regan, I felt, shared my concern, said he was alarmed and would talk to the President. I later learned that Vice Admiral Poin- dexter reportedly told Ambassador Price that there was no more than a smidgen of reality to the story. "Smidgen" is his word. When I got to him, I told Vice Admiral Poindexter my feelings, but he did not share my concerns. He claimed that we were not dealing with these people; that that was not our deal. I told him the President was very exposed. Soon thereafter I recall being told by both Vice Admiral Poindexter and Mr. Casey that the operation had ended and the people involved had been told to "stand down." During this period [May 1986], I heard from time to time of reports that the oper- ation may have resumed-that is, through the things that roll around on the grape- vine. I heard nothing official to this effect, however. (Shultz, SRB, 53-55) Ambassador Price also called Poindexter with the same news. Poindexter wrote North a sum- mary of the tale. I told Charlie [Price] that there was only a shred of truth in this and the US connec- tion was highly distorted. Tiny told [Bob] Frasure [on Price's staff] that he didn't like the deal and did not want to get involved unless it was an American operation. I told Charlie to advise him not to get involved. What in the hell is Nir doing? We really can't trust those sob's. (Poindexter PROF note to North, 5/3/86) North replied at length, seeming to inform Poindexter of the way the operation was fi- nanced. I agree that wecannot trust anyone in this game. You may recall that nearly a month ago I briefed you to the effect that Tiny Roland [sic] had been approached and we went back through Casey to tell these guys that the whole thing smelled very badly. We know that Khashoggi is the principal fund raiser for Gorba and that only after Gorba delivers a cargo does he get paid by the Iranians. We do not believe that Tiny is still engaged in this effort. Nir has been told to stay off the skyline on the issue. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 The story you had relayed to you by Price was the one made up by Nir to cover the transaction and Clair George reported it to us when the issue first came up several weeks ago. At the bottom line, this typifies the need to proceed urgently to conclude this phase of the operation before there are further revelations. We all know that this has gone on too long and we do not seem to have any means of expediting the process short of going to Iran. In that regard, George [Cave] and I are leaving to- morrow at 0700 to meet with Gorba in London. We intend to tell him that unless a deposit is made by the end of the week, the whole operation is off. We wd then have Gorba call [his contact in the PM's office] in our presence and have George reinforce the criteria for proceeding: We go to Tehran; within 24 hrs all hostages released; 8hrs [sic] later we deliver the 240 parts; within 10 days we provide those parts which cannot fit on the a/c. In return we get to raise the issues of Nicaragua, no more terrorism and help for the Afghan re- sistance. This SEEMS to be what [the Ira- nian official] has already said he has gotten the "authorities" at his end to accept, but we want to be sure before we,proceed. Lord willing, Gorba will then make the requisite deposit on Thursday, we will start to assemble the cargo by Friday, and the following weekend we will go to Tehran. We all hope. (North PROF note to Poindexter, ?5/5/86, 22:34:44) North went to London on May 6. The evening before, Poindexter instructed him: "Do not let anybody know you are in London or that you are going there. Do not have any con- tact with Embassy . . ." (Poindexter PROF note to North, 5/5/86) Cave remembered that the first May meeting set the stage for the trip to Tehran. Cave spoke to the Iranian Prime Minister's office to fix the arrangements. They haggled over what the Americans would bring with them, the Iranians asking for all the HAWK spare parts. Agree- ment was reached on one-quarter-one pallet. Ghorbanifar said we would be meeting with the Prime Min- ister, the President, Khameini, possibly Ha- shemi Rafsanjani, and another well-known conservative Ayatollah, named Ayatollah Farsi. He was one of the original candi- dates for president in the election when Bani Sadr was elected President. (Cave 8) Ghorbanifar informed the Americans that financing had been arranged, and that he would deposit funds "in an account controlled by Mr. Nir. We eventually got the money in our account on the 16th of May, and that was a de- posit from General Secord into the account we had in Switzerland, in Geneva." 66 Cave told the Board that the CIA had no idea where the money went after Ghorbanifar made the deposit into Nir's account, "nor do we have any idea of how much was deposited." (Id. at 9) When North returned to Washington, he wrote Poindexter that I believe we have succeeded. Deposit being made tomorrow (today is a bank holiday in Switzerland [May 8]). Release of hostages set for week of 19 May in sequence you have specified. Specific date to be deter- mined by how quickly we can assemble requisite parts. Thank God-He answers prayers. (North PROF note to Poindexter, 5/8/86, 8:07:46) 66 The transaction involving HAWK spare parts in May 1986 covered some 299 items worth $6.5 million. Iran was to have paid $15 million. The financial arrangements followed the pat- tern established for the February shipment of 1,000 TOWs. Kha- shoggi raised $15 million from various financiers and deposited the funds in the Lake Resources account on 14 May. CIA's Swiss account was credited with $6.5 million on 16 May to repay the Defense Department. The transaction was not completed. The United States failed to deliver all the spare parts because Iran failed to secure the release of all American hostages being held in Lebanon. In reviewing price lists for what had been provided, Iran discovered a substantial overcharge. By August, Tehran had provided Ghorbanifar with only $8 million to repay Khashoggi, leaving the Saudi $10 million in debt (the balance of the $15 mil- lion advanced plus a 20 per cent "costs and financing" markup- in this case $3 million). When the United States decided not to use Ghorbanifar as an intermediary, Khashoggi had little pros- pect to recover the rest of his money. All he held were unfunded drafts from Ghorbanifar. When Khashoggi attempted, through Roy Furmark, to obtain his money from Lake Resources, he dis- covered that only $30,000 remained in the Lake account. An- other $8.5 million was unaccounted for, leaving the amount for diversion at .somewhat just short of $15 million (including $6.3 million unaccounted for from the February transaction). An addi- tional $2 million was unaccounted for after the November 1986 shipment of 500 TOWs. B-94 _ Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 C. Excursions: May 1986 The way was now clear for McFarlane to visit Tehran. While planning the trip, other issues continued to occupy the NSC staff. The United States received information about Iranian ter- rorist operations to be conducted against the United States. Poindexter wondered if Ghor- banifar should be reminded "that we thought we had a committment [sic] from them on future terrorist activity against US." (Poin- dexter PROF note to North, 5/13/86, 19:08) On May 15, North replied in two parts. First, he noted that everybody shared Poindexter's concern. Some members of the team thought the Syrians had recruited important members of Hizballah. Others, like Cave, blamed faction- alism with Iran's ruling group. Nir is already aware of this and intends to note to Gorba that his $15M is at great risk if one of these events does indeed happen. Gorba is probably not the best interlocutor on this matter and we wd stand a far better chance talking directly to [the official in the Prime Minister's office]. It wd be worthy of some consideration to do just that before we go all the way through with the execution of what is now in motion. Cave and North are still prepared to go if you think it wd help. I do. So does George. (North PROF note to Poindexter, 5/13/86) North's second note informed Poindexter that his wish had been carried out, and warned of Ghorbanifar's having "penetrated" the CIA. Nir and Copp are with Gorba. Both have made points as you urged. In response, Gorba has promised that every effort will be made to stop unauthorized actions being undertaken by Hizballah or Iranian activists in the field. He has also provided the following which was transmitted a few minutes ago via Dick's secure device: "As you remember fm London, Gorba suggest- ed we get together with Howaldi Al Homadi (or Hamadi) of Libya whom Gorba claimed to be the head of internal security and de facto number 2 man in the country. Nir checked this in his records and indeed Homadi is head of internal se- curity and in key govt position plus con- nection to terrorists abroad. . . . Homadi does not believe that this is an effective channel since FoMin is not well connected. Homadi is willing to come to any point in Europe to meet with North or other appro- priate official without preconditions. Homadi willing to deliver three things-no more attacks against U.S.; work out sched- ule to get terrorists out of Libya; to trans- fer business contracts from EastBloc [sic] to West. In return, Homadi wants to settle misunderstandings btwn Libya and U.S. to include some kind of mutual public expres- sions. Willing to come anywhere in Europe given one week's notice. Gorba says Homadi sees himself as heir apparent to Qadhafi, knows about USG plans to use exiles for new Libyan govt; says it will not work." END OF NIR MESSAGE FROM GORBA. There may or may not be anything to what Gorba has said of Homadi wanting to meet w/ North or other USG official. . . . I have not passed any of this to any but you. Nir has asked that we protect him and not reveal his involvement in this to CIA. Nir is, as you know, operating w/o Mossad back-up and has considerable concern about the CIA becoming more knowledge- able about his activities. Based on what Gorba has just told us, Nir has reason to be concerned. (North PROF note to Poindexter, 5/15/86, 21:36:09) "The CIA are really bunglers," Poin- dexter replied. You had better pass most of this to Casey directly. I would not pass it to anybody else. Leave me out of it. We need to think about a message to pass back to Homadi thru Gorba next week." (Poindexter PROF note to North, ?5/16/86) 67 In the course of informing Poindexter that he had passed Ghorbanifar's information to the Director of Central Intelligence and Clarridge, North told Poindexter that the Nicaraguan re- sistance 67 At this time, Poindexter became concerned that North's "operational role" was becoming "too public. From now on," he wrote, "I don't want you to talk to anybody else, including Casey, except me about any of your operational roles. In fact you need to quietly generate a cover story that I have insisted that you stop." (Poindexter PROF note to North, 5/15/86, 21:21:58) North replied on May 15: "Done." (North PROF note to Poin- dexter, 5/15/86, 21:39:23) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 now has more than $6M available for im- mediate disbursement. This reduces the need to go to third countries for help. It does not, however, reduce the urgent need to get CIA back into the management of this program. We can only do this by going forward with the reprogramming proposal and getting the requisite authori- ties for CIA involvement. Unless we do this, we run increasing risks of trying to manage this program from here with the attendant physical and political liabilities. I am not complaining, and you know that I love the work, but we have to lift some of this onto the CIA so that I can get more than 2-3 hrs of sleep at night. The more money there is (and we will have a consid- erable amount in a few more days) the more visible the program becomes (air- planes, pilots, weapons, deliveries, etc.) and the more inquisitive will become people like Kerry, Barnes, Harkins, et al. While I care not a whit what they say about me, it could well become a political embar- assment for the President and you. Much of this risk can be avoided simply be cover- ing it with an authorized CIA program un- dertaken with the $15M. This is what I was about to say in the meeting today 68 and a point that I believe Shultz does not under- stand in his advocacy of Third [sic] country solicitation. I have no idea what Don Regan does or does not know re my pri- vate U.S. operation but the President obvi- ously knows why he has been meeting with several select people to thank them for their "support for Democracy" in CentAM. In short, we need to proceed with the $15M. Shall I work this up? (North PROF note to Poindexter, 5/16/86) Poindexter authorized North to prepare a paper "for the $15M reprogramming." (Poin- dexter PROF note to North, 5/17/86) He added: "I understand your concern and agree. I just didn't want you to bring it up at NSPG. I guessed at what you were going to say. Don Regan knows very little of your operation and that is just as well." (Id.) When North suggest- ed that, before departing for Tehran, he and Poindexter have a quiet meeting with the Presi- 69 An NSPG on aid to the Nicaraguan resistance was held on May 16. North attended. dent and McFarlane, without papers, and that Poindexter might want to include the Secretar- ies of State and Defense and the Director of Central Intelligence, Poindexter responded negatively: "I don't want a meeting with RR, Shultz and Weinberger." (North PROF note to Poindexter, 5/19/86; Poindexter PROF note to North, 5/19/86) D. Tehran: May 25-28, 1986 Notes made by the NSC Executive Secretary indicate that at the daily national security brief- ing on May 12, 1986, VADM Poindexter dis- cussed with the President the hostages and Mr. McFarlane's forthcoming trip. The notes indi- cate that the President directed that the Press not be told about the trip. Notes made by the Executive Secretary on May 15, 1986, indicate that the President authorized Mr. McFarlane's secret mission to Iran and the Terms of Refer- ence for that trip. Those notes indicate that the trip was discussed again with the President on May 21. After the President approved the trip,69 Poindexter relied on North to make arrange- ments. At the same time, he kept informed and made his views known. North's first plan re- quired that the delegation stay in Israel for most of the weekend, May 23-25, and that Poindexter approve a request for aircraft. (North PROF note to Poindexter, 5/19/86, 12:03) Poindexter had problems with this plan. An a/c request is too closely linked to what is happening. I don't see how we can use a military a/c. Why do you have to stay so long in Israel? I had in mind you would travel separately, RDVU [rendez-vous] in Israel at a covert location, and proceed to Iran. 69 According to both the Maximum Version and Historical Chronology, the President approved the trip on May 15. (Maxi- mum Version 7; Historical Chronology 11) McFarlane told the Board that, in his view, the President was very moved by the hostage captivity, and that is purely speculation. But I know that that was terribly impor- tant to him. t t ? [The President met with the hostages' families] almost every time he took a trip. I remember one to Dallas, Indianapolis, Chicago, on separate occasions. And there would be a family or two, and they would come in and he'd meet with them, and it would be a very anguishing kind of a thing. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 (McFarlane (1) 30) (Poindexter PROF note to North, 5/19/86) Late on May 19, North prepared a detailed plan We will endeavor to do it any way you want but we are experiencing significant logs [logistics] problems which are consid- erably eased by the use of a military a/c which can deliver the people, communica- tions equipment (classified SATCOM, bea- cons, etc.) and still provide a modicum of rest. The present plan includes the A/C as a part of the OPSEC in that RCM has reason to use such an A/C.... The same applies to a lesser extent to RCM. The fol- lowing sched is what is driving us: Weds; May 21 1000-Copp dep for final sched mtg w/ Gorba 1000-240 Items arrive for final packing/sani- tizing by CIA. Thursday; May 22 1000-240 items + 508 TOWs moved fm to Kelly AFB by CIA 1400-Commercial 707 (# 1) arrives Kelly to load most of 240 items 30-Copp arr. Geneva 1700-Commercial 707 (# 1) Dep Kelly for Israel w/ bulk of 240 items aboard 45-North Dep Wash. for London 2000-Copp Dep Geneva for Israel w/ 707 Special Crew for IAF 707 via Lear Jet. Friday; May 23 0100-G-3 Dep Andrews w/ Cave, Teicher, CIA communicators (2) plus equipmt 0200-G-3 P/U RCM at Laguardia [sic] (speech that evening in NYC) 0230-Copp arr. Israel w/ 707 Spec Crew 1400-G-3 w/ RCM arrive Gatwick; P/U North 1400-Commercial 707 (#2) Dep Kelly AFB w/ 508 TOWs for IDF enr Israel 1400-Commercial 707 (# 1) An Israel w/bulk of 240 items; commence xfr to IAF 707s prior to commencement of Sabbath. Saturday; May 24 0800-G-3 w/ RCM; communicators & party arrive Israel-start rest period 1700-Commercial 707 (#2) Arrives w/ 508 TOWs & remainder of 240 items; com- plete xfr of 240 items to IAF 707s after sunset (end of Sabbath) 2200-IAF 707 (#A) w/ Copp special crew & RCM party dep Israel enr T. 2200-bulk of 240 items transloaded fm Com- mercial 707 (#2) tp IAF 707 (#B). Sunday; May 25 0830-RCM & party on IAF 707 (#A) arrive T. prepared for mtgs. Monday; May 26. 0800(?)-U.S. parties turned over to CRS or ICRC in Brt. [Beirut] 1000-IAF 707 (#A) Arrive T. w/ bulk of 240 items. In the plan above all times are local. As in- dicated in earlier discussions we have had on this matter every effort is being made to preserve OPSEC. Because of real world constraints on what can fit in the a/c we will load part - of the 240 on 707 # 2 and they will be handled separately when they arrive in Israel w/ 508 IDF TOWs. We have tried to compartment the whole effort at . . . Kelly AFB so that no two work shifts at either location has a clear picture of what is being loaded out via the two commercial 707s. The same thing applies to the 707 aircrews (3 of them) which we are providing for this mission. No one crew knows about the other, nor will they see each other. For example, the crew that is going out with Copp to fly the IAF 707 (# A) w/ RCM & party does not know about the two 707s arriving fin Kelly. The only part of this operation that we are not doing ourselves is the CIA comms, bea- cons and documentation for the party. ALL other arrangements have been made through Copp or affiliates and if we have to, I suppose we can arrange to fly RCM and the communicators out on their own. Quite frankly, however, I do not see the vulnerability of using a military G-3 which will considerably ease our clearance prob- lems given the hour of the day/night in which we are moving. We now have, I be- lieve, a G-3 (or two) available which do (does) not have the usual USA marking on the side. Finally, the length of stay in Israel is not, in my opinion excessive, given the rather reigorous [sic] schedule we are at- tempting to accomodate. We are being driven by Sabbath requirements in Israel, Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Ramadan in T. and an awareness that the situation for our four in Beirut looks more desperate by the day. In an effort to ad- dress all of these competing and conflict- ing concerns (to include the availability of commercial 707s, cleared special mission crews, and the peculiar demands of low profile work schedules at . . . Kelly AFB and in the IAF) we have had one hell of a circus. In short, the use of a military G-3 would provide a much needed respite from the havoc of trying to answer all of these issues all over again without further risking OPSEC. It can be done, but it would be much better if we did not have to. (North. PROF note to Poindexter, 5/19/86, 23:00:07) Poindexter then wondered about using a CIA aircraft: what did the Director of Central Intel- ligence use when he travelled. (Poindexter PROF note to North, 5/20/86) North replied that CIA aircraft in the United States lacked the necessary range, and available CIA proprietary aircraft were overseas and lacked certificates necessary to fly in the United States. The Di- rector of Central Intelligence used military air- craft, but that option, North wrote, "is in the realm of too hard." He proposed "to make other arrangements." (North PROF note to Poindexter, 5/20/86, 10:38:12) Poindexter noted that It is not that it is too hard; I just don't think it is a good idea. Leaks at this point could be disastrous. This is different from other secret missions in that anybody that knows anything (or thinks they know some- thing) connected with this mission will be sorely tempted to talk about it afterwards if it is successful. Let me know what you work out. (Poindexter PROF note to North, 5/20/86, 14:10:03) Later on May 20, North sent Poin- dexter another schedule and itinerary for the delegation: This further re transportation arrange- ments for RCM & party: Cave + Teicher + Communicators will depart IAD aboard Private (Democracy INC.) G-3, stops in NYC to p/u RCM. G-3 Proceeds direct to Rhein Main military airfield, cleared thru customs by CIA . . . North . . . picked up in London by Lear 35 owned by Democra- cy INC. European subsidiary. Lear 35 drops North at commercial side of Rhein Main, North passes thru customs/immigra- tion as Goode, proceeds to military side to rvs [rendez-vous] w/ RCM party. RCM party on arrival at FM offloads from G-3, transloads to CIA 707 (if available) or to chartered Swiss Challenger a/c for direct flight to Tel Aviv. Still having local point clearance problems for bringing G-3 into RM w/o customs/immigrations clearances. We are going to have to bring . . . Frank- furt into this to work out clearances. Will talk to him tonight via PRT-250 @ approx 0300. Slid have answer shortly thereafter ... today provided recommended turnov- er points for hostages. We have sent one of our Democracy INC couriers to deliver flight schedule and turnover info to Gorba in London. Gorba scheduled to go to Tehran on Thursday [May 22]. Copp de- parture for Geneva/Tel Aviv postponed 24 firs fm original schedule in order to com- plete coordination of RCM flight planning. Norta [sic] still on schedule to depart Thurs pm for . . . London. Complete ops plan and annexes being prepared for yr use during op. Will prepare in advance necessary paperwork and cables for dis- patch of Hostage debrief team, Nighten- gale Medevac support and hospitalization alert for Wiesbaden-all of which wd be dis- patched only when hostages are released. Will also have required checklist for alert- ing State to notify families, move same to Europe for reunion. OPLAN includes three sets of press guidance-appropriate to var- ious circumstances which could occur on mission.70 Finally, need guidance as to whether or not you want to prede- ploy. . . . It wd be good insurance if things get screwed up during/after turnov- er of hostages-particularly if turnover does not result in hostages being brought all the way to our embassy. All involved believe it is unlikely that Iranians can get them this far with or without help from 70 Press guidance prepared covered the release of the hos- tages, the discovery of the mission to Tehran, and the holding of the delegation hostage. (North to Poindexter, "Hostage Recovery Plan," 5/22/86) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 -- - Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Hizballah. Most likely is release at one of the few Western Embassies remaining in W. Beirut or at AUB Hospital. We also suggested the Military Hospital crossing on the green line as a possibility. At the after- noon planning mtg [C/NE] suggested that we look at the Finding again to determine whether we can sell certain items of hard- ware to IRAQ in concert w/ what we are doing in Iran. He believes that such a step wd add considerably to our leverage in the area if this activity is uncovered by the Sovs. I share his concern. Far too much is being said over the open telephone by Gorba for them to be completely ignorant. Finally, we have several policy issues which need to be addressed. -RCM should be able to suggest to the Iranians that we are willing to put a permanent Comms unit (2 CIA) into Tehran to facilitate future exchanges of information - w/o a middle man/ [sic] -What do we do if they can only spring one two or three of the hos- tages after making a good faith effort? -What do we do if, after 72 hrs, noth- ing happens? These are the kinds of things I had envi- sioned for discussion in the private mtg w/ RR. At the very least, you slid talk to RCM about these things, preferably face to face. While we all expect this thing to go peachy smooth, it may not. RCM, is taking no small risk in this endeavor just flying around the way we will have to. He doesn't have to take this kind of chance. I know that everyone is very busy, but it wd, in my humble opinion, be thoughtful if you can find a few minutes to discuss the issues above w/ him and say good by. While I'm confident he'll be back next week, I could be wrong and it might be a very long time before anyone sees him again. (North PROF note to Poindexter, 5/20/86, 15:37:49) In the afternoon of May 22, North submitted to Poindexter an updated schedule for the trip. It did not materially differ from the versions prepared on the 19th and 20th. The updated schedule was part of a package of materials North prepared. It included an "Operations Plan," which defined the objective as: "To secure the return of four American hostages [Jenco, Anderson, Jacobsen, and Suth- erland] who continue to be held by Hizballah elements in Lebanon." (North to Poindexter, "Hostage Recovery Plan," 5/22/86, Tab I, "Operations Plan") The "Concept" was: "Pro- vide incentives for the Government of Iran to intervene with those who hold the American hostages and secure their safe release." (Id.) The CIA was responsible for delivering "sup- plies" to Kelly Air Force Base; providing an in- terpreter, communicators and their equipment, and travel documents; providing an intelligence briefing package, with photographs; "[f]und maintenance and test/calibration of two Phase I radars at Letterkenney, PA. Investigate avail- ability of two Phase II radars from DOD/FMS channels"; provide a communications schedule, including frequencies; recommend site and conditions for the release of the hostages in Beirut. "Democracy Inc. Charter" was to pro- vide two Boeing 707s to transport "supplies" from Kelly to Tel Aviv. "Democracy, Inc." would provide two vetted crews for the Israeli aircraft; a Swiss Air Learjet to transport Secord from Geneva to Tel Aviv on May 22; a "CANAIR Challenger for delegation airlift from Dulles to Ramstein AFB on Friday, May 23;" and six Blackhawk .357 magnums in pres- entation boxes. Secord would act as liaison by secure communications between the CIA/NSC and the delegation. The Israelis were to pro- vide funds for 508 TOWs (to replenish Israeli stocks after the August/September 1985 trans- fers, (CIA/IG Chronology 24)); two black 707 aircraft for transport to Tehran; and a "liaison officer" to the American delegation. NSC responsibilities constituted the longest list. They included the senior emissary; liaison with the White House; contingency press guid- ance; and arranging for the debriefing of hos- tages and the reunion of families, among other details. The Defense Department's role consist- ed of providing equipment and supplies "through intermediaries," transport for the hostage reception team and transportation in connection with the release of the hostages. The delegation would carry alias passports. There would be no rehearsal. (Id.) The sched- ule noted that McFarlane would board a CIA B-99 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 proprietary 707 at Ramstein for the trip to Tel Aviv. North's package also included "Terms of Reference" for the delegation. It had been printed at various times since the draft of April 4, but had undergone no material change since then. The "Terms of Reference" were boiled into an outline and talking points for the dele- gation. The day North submitted his package, Ledeen saw Peter Rodman, Deputy Assistant to the President for National Security Affairs (For- eign Policy). Rodman wrote Poindexter that Ledeen urge[d] that we use our Iranian channels as a vehicle for stirring up dissidence within Iran, rather than for (as he puts it) cutting deals involving arms for hostages. Mike says his contact Gorbanifahr [sic] has access and influence with a dissident Ayatollah . . . as well as with disloyal ele- ments spread throughout the military and the bazaars. There is great potential here, Mike feels, for a U.S. covert program to undermine the regime. He claims that both Bill Casey and Bud agree with this, and that it's a perfect program for Dewey Clar- ridge's operation. The obstacle, he says, is that we are follow- ing an alternative approach that is too much hostage to the hostage problem. I said nothing to Mike, but I have to say that I have long had a similar concern that we might be gearing our policy too much to the hostage issue rather than to the stra- tegic menace that the regime represents. The special one-page finding of a few months ago put the hostages in a properly subordinate place among our objectives- but in practice our approach seems to re- quire a hostage release as an early token of good faith.... Perhaps this is something for you to dis- cuss with Casey, with Bud, and with Ledeen. (Rodman to Poindexter, 5/22/86) McFarlane recalled that Poindexter asked him to attend a briefing on the trip in the last week of May. I was asked by the Admiral to come by and get my instructions that he said had been approved by the President-these were about four pages-the political agenda. Here are the political issues that you should develop and they dealt basically with our view of our interests in the Middle East, our view of Iranian conflicts with us and disagreements, basically-ter- rorism, the continuity of the war, the ex- pansion of fundamentalist influence in other moderate regimes in the area, and, separately, our view of their vulnerabilities to the Soviet Union and our sense of mile- stones for dealing with specific issues that might over time get us toward a more stable relationship. And I asked again. I said, is the Secretary of State and Defense, DCI, the President all on board with this. He said, well, they are involved in the preparation of these in- structions. He said that, and they are in- volved in this decision, yes. The President has approved it. And then these instruc- tions. The positions haven't changed. The Secretary of State is against the arms com- ponent of it, as is the Secretary of Defense. (McFarlane (1) 33-34) McFarlane had the sense the instructions represented an NSPG "prod- uct." He was not aware that his aircraft would carry military equipment to Iran until he ar- rived in Tel Aviv. (Id. at 34) McFarlane's delegation-McFarlane, North, Cave, Teicher, Nir, and a CIA communicator- left Tel Aviv for Tehran on May 25. Secord and one communicator remained in Tel Aviv. According to Cave, the Israeli government pressed for Nir's participation, and McFarlane ultimately decided to include him. (Cave 10) The aircraft carried a pallet of HAWK spare parts, which was loaded in Israel. The delega- tion also carried a chocolate cake from a kosher bakery in Tel Aviv - "more of a joke than any- thing else between North and Ghorbanifar." (Teicher 10) McFarlane sent Poindexter two reports of the meetings; Teicher made detailed memoranda of conversations. McFarlane's first cable report- ed: Delegation arrived Tehran Sunday morn- ing. Absence of anyone to receive us for B-100 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 over an hour and recurrent evidence anxie- ty ineptitude in even the most straightfor- ward discourse makes it clear that we must take a step back from the history of the past 8 years and put our task in a different light. It may be best for us to try to picture what it would be like if after nuclear attack, a surviving Tatar became Vice President; a recent grad student became Secretary of State; and a bookie became the interlocu- tor for all discourse with foreign countries. While the principals are a cut above this level of qualification the incompetence of the Iranian government to do business re- quires a rethinking on our part of why there have been so many frustrating fail- ures to deliver on their part. The other reason for the several snafus has been the extreme paranoia that dominates the think- ing of the political leadership here. More about this later. First let me debrief the meetings that have been held before giving you a sense of where and how fast matters can progress. Once matters were sorted out at the air- port, we were met by Gorba and [the offi- cial from the Prime Minister's office] taken to the Hilton Hotel and installed in the top floor along with considerable security (CI) people from their side. After a short rest we convened our first meeting at 1700 local Sunday afternoon. It was a founda- tion session in which we established that we acknowledged the Iranian revolution; had no interest or intention in trying to re- verse it; indeed believed that a strong in- dependent, non-aligned Iran was in the U.S. interest but that such a situation was unlikely to be possible in our judgement for a number of reasons. First, it seemed clear to us that the Soviet Union was pre- pared to go quite far to prevent an Iraqi defeat in the war and may well have ambi- tions vis a vis Iran that we would be pleased to discuss during our talks. For our part, we can envision restoration of a normal relationship with Iran but not under circumstances in which they work against our interests WHETHEPPj$i.u#ERRORISM [?whether by support of terrorism] or support for subversion of our interests in Nicaragua and elsewhere. Our interlocutors were [officials in the Ira- nian Prime Minister's l office]; Gorba and one other functionary. Their response to all this was on the whole expressed in a spirit of good will. "We are open to a stable relationship with the U.S. but it will not be easy to overcome a bitter history etc etc" but in a larger sense the central message to us was how uncertain, fearful and timid these third and fourth level officials were. Further, it has become more and more clear that while Gorba has brought us to the beginning of a dialogue with the GOI, he has done it with consid- erable hyperbole, occasional lies and dis- sembling. Our interlocutors' defensiveness was expressed through a diatribe about how we hadn't brought enough supplies and thus were acting in bad faith. This was easily rebutted and they were put on the .defensive regarding their failure to produce on the hostages but it made clear the need to get beyond their level if we are to do any serious business here. The meet- ing ended on a harmonious note. They asked that we propose an agenda for today's meetings. We did so last night; ba- sically an abbreviated statement of the TOR paper I reviewed before leaving. [page cut off] brought with us. We recalled them later in the evening and in no uncer- tain terms . let them have it for Iran's breach of faith and insolent behavior that we expected to be corrected forthwith. This morning, after apparently consider- able internal to and fro on their side, [name deleted] was dispatched to apolo- gize and to say that they wanted the meet- ings to succeed. (Late entry: beginning with our arrival and frequently since Gorba has continued to say "The hostages will be released and things are going in the right direction and don't worry" and other rhe- torical irrevelancies.) [name deleted] also said that their leaders had designated an official with higher authority than they to come to meet with us this afternoon (Monday). I made clear that if he was coming to spend needless time discussing B-101 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 the supplies or other forms of niggling that he could do so with the staff. He arrived at about 9:45 tonight and lasted until just about 1:45 Tuesday morning. As it turned out this man [a senior foriegn af- faris advisor] was a considerable cut above the bush leaguers we had been dealing with. In the course of the 4 hour meeting it became evident that the three Iranian leaders-Rafsanjani, Musavi (Prime Minis- ter) and Khamenei (President) are each traumatized by the recollection that after Bazargan met with Brzezinski in the Spring of 1980, he was deposed (so strong was popular sentiment against doing business with the Great Satan). Today the force of events and self interest has brought them to the point of realizing that we do have some common interests (vis a vis the Rus- sians, Afghanistan and perhaps even against Iraq.) But they still cannot over- come their more immediate problem of how to talk to us and stay alive. But from the tenor of this last man's . . . statements, conviction and knowledgeable expression of what is possible in the way of a stable cooperative relationship, I believe we have finally reached a competent Iranian offi- cal-and that's good. Nevertheless we cannot, in my judgment be swooned by serious dialogue without acts. Thus I did not meet with this man as a firm signal that although we have come to set iur motion a sustained process, we must first set aside a number of obsta- cles-notably by the release of the hos- tages. This was forcefully stressed to [name deleted] tonight and we have re- ceived throughout the day periodic reaffir- mations that steps are in motion, we are working on it, don't worry etc. etc. etc. With that in mind, when he comes back to- morrow to go discuss-the agenda, I intend to have him meet with the staff with perhaps an intervening summons for him to come visit with me to try to set some specific milestones for moving ahead. These would include: 1. An end to the ex- treme rhetoric on both sides (although we will call it as it is if there is a recurrence of terrorism against us) 2. The establishment of a. communications capability between us full time as soon possible. 3.. The position- ing on the ground here a technical expert to get us away from these endless ex- changes of requests for items they don't need. With regard to the hostages we have and will continue to make clear that their re- lease is the sine qua non to any further steps between us. And if that has not hap- pened by tomorrow night, they are aware that we will leave and that the balance of this shipment will not be delivered nor will any change to our stance be considered. As to my judgment on where we stand, it seems clear that we are dealing with people at the top who: 1. Understand that they have an important interest in trying to establish a dialogue that leads to a meas- ure of cooperation with us. 2. That doing so requires that they deliver on certain kinds of behavior e.g., release of the hos- tages and no further terrorist acts against us. 3. Are very fearful for their own vulner- ability to factional attack if they are discov- ered in this dialogue before they can con- dition the people to a different perception of the U.S. 4. Are trying to run a country with almost no competent officials below the very top and need help. So we are on the way to something that can become a truly strategic gain for us at the expense of the Soviets. But it is going to be painfully slow. As we proceed we cannot be gulled by promises of what will happen tomorrow-at bottom they really are rug merchants. But little by little we can make progress because it is a matter of self interest for both of us to do so. I will give you a more thoughtful fill to- morrow after our meetings-it is now 3:35 a.m. local. I feel that we have entered a sensible process and finally gotten a com- petent interlocutor on the other side. If you have any special instructions before we meet tomorrow please let me know. Hope you had a nice weekend. Your guys are doing a fantastic job as is Cave and the communicator who is near death. B-102 __ Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 MEMORANDUM OF CONVERSATION SUBJECT: U.S. - Iran Dialogue PARTICIPANTS: U. S. Robert C. McFarlane Oliver L. North George Cave Howard R. Teicher Israel Amiran Nir Iran [A Deputy Prime Minister] [Assistants to the Prime Minister] DATE: May 25, 1986 PLACE: Tehran, Iran, Independence Hotel TIME: 5:15 p.m. [The Iranian official] opened the plenary meeting. He said he was very happy to see the U.S. delegation here. Hoped this will be a useful trip with good results. Ex- pressed regret for inconvenience at the air- port. "Ready to begin negotiations and talks." After introducing his colleagues [the Iranian official] said the main purpose of this meeting is to prepare an agenda for other political discussions. McFarlane expressed on behalf of the Presi- dent his pleasure to be in Iran to start what the U.S. hopes will be sustained dis- course. McFarlane made the following opening statement: "The President asked that I portray for your leaders U.S. goals, the basis of disagreements, and try to find common ground for cooperation. Perhaps I could propose a format for our ex- changes. First a session for an exchange on fundamental issues. In such a session we could present our goals, the nature of the peace we seek in the M.E. and more broad- ly. We could then turn to how we see our responsibilities vis-a-vis the USSR, and what we see as important to U.S. security interests in other parts of the world. We can also describe how we see the history of U.S.-Iranian relations going back 10 years. In these talks, on bilateral matters, we would hope to make clear that the U.S. ac- cepts the Iranian Revolution and has no wish or presumption of influencing it in any fashion." McFarlane stressed "the U.S. hope that from this day forward, the U.S. and Iran can proceed where interests converge. No doubt there are elements of Iranian policy that the U.S. will disagree with. But it is important we understand the disagree- ments." After a general discussion of the global and bilateral agenda, McFarlane sug- gested that it might be useful for experts to exchange information, e.g., nature of Soviet intentions and capabilities in this part of the world. "I'd like to stress some- thing *at the beginning. Obviously we've had disagreements over the past eight years. But the U.S. recognizes that Iran is a sovereign power and we should deal on the basis of mutual respect, not intimida- tion. That's why before we begin high-level talks we put behind us hostage-taking which has occurred in the past. We are pleased that informal talks resulted in agreement on release of American hos- tages. Once that is completed we can begin serious talks. I want to stress our apprecia- tion for your hospitality, especially during Ramazan [sic]. All of us are pleased to be here. This can lead to an historic new be- ginning." [The Iranian official] replied that "he wanted to lay a groundwork regarding cer- tain issues before meetings begin. This revolution was totally depending on God, independent Iranian power and unique ideology. These factors allowed this revo- lution to come into being. This revolution came to power because for years the nation was under dictatorial pressures. These pressures contributed to the revolu- tion's success. I am sure you can feel how the nation and people think after so many years under pressure. Iran can now act freely. What do you expect from them now that they are free? I want to express a very important point. This revolution cost much blood. After so much blood, the people don't want hostility directed against them. The leader and the people expressed their will to look forward, not to the past. The key question to the past eight years may help explain why our relations were not good. We have a famous saying "Past is a mirror for the future." It is not the time to B-103 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 discuss what went wrong over past five years, but I want to emphasize a few points. We don't want to align with East or West, but that doesn't mean we don't want relations. Iran had relations with the U.S.A. at first. But refuge for the Shah and interference in our internal affairs dam- aged relations. U.S. refuge for the Shah was bad but your military action was a demonstration of hostile intent. All the points combined led to break in confidence in U.S.G. To rebuild bridge of confidence will take time. We are moving toward this goal. Best proof and reason we are moving is informal meetings and your presence here in Iran. You know better than anyone that your presence here is most important development in this process. Believe we will reach this goal by fulfilling the neces- sary steps that have already been agreed to. I didn't want to review the past but I needed to mention the background." Turning to the agenda, [the Iranian offi- cial] said he needs to make the agenda clear for Iranian leaders. "The first item should be U.S. goals in the area. The basic priority is to build a bridge of confidence. Both Iran and the U.S. must build confi- dence and trust. Once bridge of confi- dence is established then other priorities can be addressed and solved. We expect from you that the U.S. will supply physical support to Iran. U.S. support will be with us. This is best way to build confidence. For the U.S.A. to demonstrate that it is with Iran." McFarlane welcomed climate of [the Irani- an's] remarks. Bodes well for talks. "We agree that we should take advantage of cer- tain measures that were agreed in the in- formal talks. Regarding the commitment of the U.S. to turn a page, this is expressed by my presence on behalf of the President. The corresponding commitment on the part of your government to put the past behind us is to use your influence to secure the release of captive Americans. They are not held by Iran but the captors are also subject to Iranian influence. Final- ly as an earnest showing of our good faith, we are prepared to transfer certain items which may be of assistance. We have brought some of these with us. In virtually all cases we could handle via aircraft. If not, other items will follow as this se- quence evolves. Perhaps we could start dis- cussions tomorrow morning on goals. At the conclusion of this discussion, we could have specialized sessions on the Soviet Union and Middle East situation." [The Iranian official] specified Soviet in- tentions, Afghan issues, Lebanese affairs, Middle East peace, Iran-Iraq war, Kurdis- tan. "What is your view about Iraq? It's regime?" McFarlane said, "We are prepared to dis- cuss all of those issues. Let us begin with a long session where we can make summary comments on each topic. Then later, when talking about Soviet capabilities, perhaps experts could meet. But the general threat and how to meet it can be done in a gener- al session. In order to have clarity we can write out the agenda tonight." [The Iranian official] changed the subject, stating that "for humanitarian reasons we have acted on your hostages. But we ex- pected more than what came on the air- craft." McFarlane answered that we could not bring it all on the plane. But the rest can be brought forward. [The Iranian official] reiterated the human- itarian dimension, noting that ["]Iran did not take these people captive." North expressed U.S. gratification for Iran's humanitarian assistance. He asked what Tehran wants the U.S. Government to say about Iran's role. The U.S. does not want to embarrass Iran. But if the Iranian gov- ernment would be served by a U.S.G. statement it can be made. "We hope this will happen in next few hours." [The Iranian official] said that Iran took this step as a humanitarian act. "We start- ed the process, but cannot forecast when it will happen. We can discuss this affair later. We expect anyhow to receive more items from you so that we will be in a better position with our leaders. I want to make this point very clear. Iran has been at B-104 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 war for six years. Fao was a great accom- plishment. We are expecting more equip- ment." McFarlane stated that the agreement which was concluded will be fulfilled to the letter. "A bridge of confidence is a useful meta- phor. I have come as an expression of good will. In addition to my own presence, we put items on the aircraft which can be brought forward. The corresponding act on your side, a humanitarian gesture, in- volves the release of our people. While separate and not related, these acts do contribute to mutual confidence. You have my word, the bond of my country, that we will fulfill our agreement." [The Iranian official] replied that "what Iran expected is not here, but as a humani- tarian gesture, Iran will send a delegation to Beirut to solve that problem while ex- pecting Iranian logistics needs to be met." He emphasized that no one knows about the McFarlane team's presence in Tehran. The Air Force is suspicious since someone is still on the plane. [The Iranian official] suggested that he stay at the hotel instead. McFarlane said, "we can't do that. Although his presence on the plane may complicate suspicions, he performs communications functions as well as logistics accountability. We can give instructions for him to stay out of sight." [The Iranian official] said there is no prob- lem with communications. But having him staying on board is a problem because he's at the military airfield. McFarlane stated that "we need communi- cations all the time. Otherwise there is no way to communicate with the President." [The Iranian official] stressed there is a se- curity problem with Air Force questioning. Turning back to substance, McFarlane said, "this is a good beginning. We do have much to do and very little time." He argued that the U.S. team's presence here should be kept brief for security. [The Iranian official] opined that "every- thing depends on good will and restored confidence. But there are some things which cause doubt. We were told that one- half of the equipment would be brought with McFarlane. You did not bring one- half. This behavior raises doubts about what can be accomplished." McFarlane forcefully interjected to end the Iranian official's protests. "Let's be clear. I have come. There should be an act of goodwill by Iran. I brought some things along as a special gesture. So far nothing has happened on your side. However, I am confident it will." [The Iranian official] apologized, stressing that he and his colleagues are not decision- makers. "We just give you a message and take your message. But we told our leaders that you would bring one-half of the items." S9307 North noted that the aircraft has weight and fuel limitations. [The Iranian official] commented that some of the spare parts are used. Angrily, McFarlane replied that "I have come from U.S.A. You are not dealing with Iraq. I did not have to bring anything. We can leave now!". [The Iranian official] said that "We prom- ised things to higher authorities regarding one-half of the items we purchased. Could you have told us it would only be one- fourth due to technical flight require- ments? Now we will have internal prob- lems." [The Iranian official] stated that this prob- lem can be solved in parallel with the other problem. A special delegation has already left to deal with the humanitarian problem. "We have all done what we should do. We respect our guests' need." The meeting concluded at 7:00 p.m. PARTICIPANTS: U. S. Robert C. McFarlane Oliver L. North George Cave Howard Teicher Israel Amiram Nir Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Iran [A] Deputy Prime Minister Assistant to the Prime Minister DATE: May 26, 1986 PLACE: Tehran, Iran, Independence Hotel TIME: 3:30 p.m. North stated that "we are confused and concerned. We have tried for months to come to a point where we could talk gov- ernment-to- government. Some in our gov- ernment opposed. McFarlane favored. I was convinced that necessary arrangements had been made. We received President Reagan's permission to proceed. We have now been here for over a day and no one will talk with us. Where are we going? Nothing is happening." [The Iranian official] replied that he won- dered "why we came to this situation. We were both happy last night. Why are you now confused? We are working to make things happen. We have similar problems with our people, but don't see any insur- mountable problems. I understand McFar- lane is unhappy about something. I want to see McFarlane." North spoke privately with McFarlane who agreed to see [the two Iranian officials] at 3:30. The meeting resumed at 3:30 with McFarlane. [The Iranian official] stated he is at McFarlane's service to solve his prob- lems. "I want to remove obstacles. Sorry, I want to solve problems, misunderstand- ings, so they won't be repeated." McFarlane said he was pleased to hear that [the Iranian official] was committed to solving problems. "My purpose in coming was to establish a basis of trust and after that to address important problems. Before coming, my President and I believed pre- liminary problems affecting mutual trust were resolved by the staff. On your part, bringing about the release of hostages. On our part, providing some defensive sup- plies. But upon arriving, I learned that the steps had not been taken by your govern- ment. That is disappointing. The more im- portant purpose is to share with your Min- isters how to restore a basis of trust be- tween us. There are crucial matters related to the Soviet Union, Afghanistan and Iraq that we should discuss. But we cannot begin to address these matters until pre- liminary problems are solved. Perhaps your government is not ready to deal with these larger issues. Maybe we should wait for an- other day. But I must depart tomorrow night. I would like to meet with your Min- isters. But I cannot if preliminary problems have not been solved. I have no more to say." [The Iranian official] said, "We seem to be moving in a positive direction. I hope we will overcome these problems. Yesterday we mentioned the Air Force problem. We are only concerned over leakage. There is no problem sending someone to the plane whenever they need to. We thought it un- derstandable that you would go back and forth to communicate. On top of every- thing else, you are our guest and we re- spect our guest on top of all else. The delay at the airport was due to your early arrival. Our main problem is that we cannot inform staffs. Regarding your gifts, we held them for security reasons. We will bring them back now, same as passports. The delay is due to the difficult effort needed to make everything work out. At 4:00 p.m., a gentleman with higher author- ity will be here." McFarlane repeated that "there are impor- tant things to discuss about the future. But this entire visit will surely provide us with indications of your commitment and good faith. So far the experience has not been a happy one. I am here to deal with larger problems. As soon as problems you are working on are solved, I am prepared to meet with your Ministers. No other meet- ings are necessary." [The Iranian official] said he had no au- thority to decide on these matters. The im- portant authority will arrive at 4:00. McFar- lane said he would not meet the person. He came to meet with Ministers. The staff can meet this other person. [The Iranian official] argued that the Irani- ans were having problems trying to ar- range a Ministerial meeting. "We have to build up to that stage." Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 McFarlane said he did not want to interfere with [the Iranian official's] problems. "Work with my staff." [The Iranian official] said his government had now appointed a high authority to follow up. This will help to open the stage. McFarlane expressed his great disappoint- ment. "We understand it takes time to make a decision to renew a dialogue with the U.S. But I must return to Washington tomorrow night. The preliminary problem in Lebanon must be overcome. I hope your Minister will come to my country next year. He will be received by my President. As I am a Minister, I expect to meet with decision-makers. Otherwise, you can work with my staff." [The Iranian official] said at the start of re- lations, there are always misunderstand- ings. McFarlane agreed, wishing the Iranians "good luck." The meeting was ended at 4:00 p.m. PARTICIPANTS: U. S. Oliver L. North George Cave Howard Teicher. Israel Amiram Nir. Iran Senior Foreign Affairs Advisor Assistants to the Prime Minister DATE: May 26, 1986 PLACE: Tehran, Iran, Independence Hotel TIME: 9:30 p.m. [The Foreign Affairs Advisor] said he was very pleased to welcome the delegation in Tehran. North stated that "we have a great opportu- nity to establish a relationship between our countries. There is a long history of unfor- tunate relations which cannot be forgotten in a minute. Men of good will have a chance to build a bridge of confidence. We may be able to work toward a common goal. Hope you've seen the proposed agenda. It provides a basis for discussion between our leaders. There is a technical agenda as well. All contribute to this great opportunity. I explained our respective commitments and the process to the Presi- dent. Perhaps we came prematurely, with our hopes too high. Our hope was to remove certain hurdles to a better relation- ship. We understand it is hard for both our countries. But we have acted in good faith. The key is in your hands. It is not easy to turn that key. Misunderstandings have oc- curred. We have put them aside." [The Foreign Affairs Advisor] said "you did a great job coming here given the state of relations between. us. I would be sur- prised if little problems did not come up. There is a Persian saying: Patience will bring you victory-they are old friends. Without patience, we won't reach anything. Politicians must understand this." North thanked [the Foreign Affairs Advi- sor], noting that this shows the value of being able to talk. "There are factions in our governments that don't want some- thing like this to succeed. This is why McFarlane grew angry when things didn't take place as I suggested they would. He took a risk urging our President to do this. There is great opposition to this project. We have to be able to show progress, not for personal reasons, but for the future. This is not a deal of weapons for release of the hostages. It has to do with what we see regarding Soviet intentions in the region. We accept the Iranian revolution and re- spect your sovereignty. Some people want to ensure that our countries find a common foundation for the future." North continued that there are areas of agreement and disagreement. "What we had hoped was to agree on the direction for a dialogue between Iran and the U.S. Political decisions will be required. We may not agree this week or year. But this process must begin. It can begin in total secrecy, with certain non-political actions." [The Foreign Affairs Advisor] asked wheth- er the U.S. can keep a secret? Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 North said "We will try. But one of the greatest liabilities is a lack of secure com- munications." Nir said there are ideas on this problem. It is a subject for technical discussions. North offered to show the Iranians a device. "We can secretly put someone here. We know the Soviets are trying to find out what we are up to. We know the Soviets know a little bit about this and are trying to find our more. They will make a major effort to expose us. Our major hope is to pacify this opposition through techncial [sic] measures. If your government can cause the release of the Americans held in Beirut, 10 hours after they are released, air- craft will arrive with HAWK missile parts. Within 10 days of deposit, two radars will be delivered. After that delivery, we would like to have our logistics and technical ex- perts sit down with your experts to make a good determination of what is needed. We need a technical survey. It must be done very secretly. However, if we go home without setting aside obstacles, there will be new obstacles." [The Foreign Affairs Advisor] asked which obstacles? North replied, "The release of the U.S. citi- zens. You said it was difficult for us to come here. We also know it was difficult for you to invite us." Nir said that the back and forth on arms has tested the patience of the President. Hostage release is important as demonstra- tion of Iranian influence and good will. [The Foreign Affairs Advisor] asked to hear about the U.S. perception of th Soviet threat. Teicher summarized the Soviet military pos- ture and threat around Iran. There are 26 divisions. The military districts in the Trans Caucasus have been reorganized and improved. Exercise activity has intensified with respect to military action against Iran. The Soviets are increasing the frequency of their cross-border strikes into Pakistan and occasionally Iran, while initiating a terror campaign in Pakistan. He stressed the im- portance of beginning a dialogue on the Soviet Union for both Iran and the U.S. [The Foreign Affairs Advisor] said, "there are training camps for Mujhadeen in Iran. Weapons and logistics support are provid- ed. We are ready to send troops into Af- ghanistan. The Russians already complain about Iranian bullets killing Russians." North asked if it would help to provide the Mujhadeen with TOWs? [The Foreign Affairs Advisor] said the T-72 is not the best weapon against the Mujhadeen. Gas, napalm, and other crimi- nal actions are their biggest problem. One million innocent victims. "Primary difficul- ty is not TOWs, though, we can cooperate with you in this area. The chemical warfare equipment is too developed. We need help curing wounded. Many die due to lack of first aid. Do you have anything more to say about Russians.?" Cave said we have eight hours worth of briefing materials. [The Foreign Affairs Advisor] said he was ready for a detailed intelligence briefing, and agreed to the agenda without change. "We are ready to listen in all areas. Though we know we won't agree in every area, we will agree on some subjects. We have to bring up some subjects from the past, around the revolution. We don't need to discuss what came before. We believe that the United States Government from 1356 (one year before the revolution) made mistakes against all peoples. Our own belief is that our revolution is greater than the French or Russian Revolutions. There have been more changes. Today we feel many in the third world are thinking as revolutionaries like us." "You see many pictures of Khomeini in the Afghan trenches,["] [the Foreign Affairs Advisor] continued. "He is their leader. We see the Imam's picture in South Africa, Lebanon, and West Africa. There are pro- tests in Marrakesh. We didn't send this pic- ture in the mail. We have no relations with Morocco that would allow us to give them the Imam's picture. The influence of this revolution has passed to many Moslems. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Islamic countries express themselves hon- estly. But there is bad propaganda against us in America and Europe. We have been victimized by more terrorism than anyone else. The President, Prime Minister, Minis- ter of justice, 10 percent of Parliament, clerics,. and innocent, have all been killed by terror. What the Afghans are doing is not terrorism. But we don't call action in South Lebanon against Israel terror." "We are against kidnapping," [the Foreign Affairs Advisor] said. "What happened here was exceptional. Because of one ex- ceptional act we should not be considered terrorists. When we turn to the subject of our relations, there are many serious things to say. We saw past U.S. leadership trying to destroy all the bridges of confi- dence. We did not start confronting you. This was not the clergy, army, jor [sic] party. It was the people. In such a revolu- tion, there is no law and order. Not one drop of American blood was spilled one year after the revolution. American military advisors took. all their belongings, as well as things they should not have taken. The memoirs of Ambassador Sullivan show it was a mass revolution. But the U.S. sup- ported Bakhtiar, who confronted us harsh- ly. We do not accept that. We did not see you sitting alone doing nothing. If there is only one other country in the world against the Soviets, it is Iran. We have a famous saying: Enemy of your enemy is your friend. You don't see it this way. Be- cause we are neither east nor west, you are both pulling us. Neither the U.S. nor the Soviet Union likes independent states." [The Foreign Affairs Advisor] said, "I am sorry to be so harsh. But I need to be frank and candid to overcome differences. We have the same problem that you have. Some here oppose relations with the U.S. I am happy to hear you believe in an inde- pendent sovereign Iran. We are hopeful that all American moves will be to support this dialogue. But we feel the whole world is trying to weaken us. We feel and see the Russian danger much more than you. You see the threat with high technology. We feel it, touch it, see it. It is not easy to sleep next to an elephant that you have wounded. To weaken Iran does not mean the Soviets want Iran. It means they want to reach the warm waters of the Gulf. Our Gulf neighbors know this. We share thou- sands of kilometers of land and water border. If we are weakened, you can fore- cast what will happen." After a pause, [the Foreign Affairs Advisor] continued, "When we accepted your team with McFarlane, it symbolized a new politi- cal development here. But there has been a misunderstanding. When we accepted his visit, it did not mean a direct dialogue would occur on the spot. It is too early at this stage." The discussion adjourned for a watermel- on break. Detailed discussion resumed over difficulty of spare parts delivery. [The Iranian official] said he would try to ar- range for an Iranian 747. [The Foreign Affairs Advisor] resumed the discussion of bilateral relations. "Our rela- tions are dark. They are very bad. Maybe you don't like to hear it, but I must be out- spoken. The Iranians are bitter. Many Ira- nians call America the Great Satan. The first revolutionary government fell because of one meeting with Brzezinski. As a gov- ernment, we don't want to be crushed to- morrow. We want to stay in power and solve these problems between us. We should not insist on special issues or a Ministerial meeting. There was no agree- ment that when McFarlane led the team it would lead to Ministerial meetings. Let us turn the key in a way that will work. We don't see the release of hostages as the key. You all must know that establishing this dialogue is the greatest challenge. China, Russia, Lebanon are easy. If you wanted formal meetings, McFarlane would have been received differently." North stated that he had told McFarlane that he would meet Speaker Rafsanjani, Prime Minister Mousavi, and President Khameini. "I was told this would happen," North said. McFarlane and Kissinger made three trips to China to set up meetings for the President. B-109 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 [The Foreign Affairs Advisor] asked why was McFarlane promised there would be Ministerial meetings? North repeated that Ghorbanifar, in [George Cave's] presence, had stated that the U.S. team would meet with the senior leadership. [The Iranian official] interjected that it had been previously agreed that North would come to Tehran to make arrangements and set the agenda. But North did not come. "We did not mention McFarlane. The last phone call did not mention Ministerial meetings. We did not agree to such meet- ings for McFarlane. We keep our word." [The Foreign Affairs Advisor] said the Ira- nian side wants to solve the whole prob- lem. "Iran does not just want to discuss spare parts. I want to state clearly, we do not encourage terror. Even the Imam offi- cially condemned skyjacking. We accept that we have influence in Lebanon. Many Islamic groups in Lebanon respect the rev- olution. We sent a man to Lebanon. We are very hopeful that we can help you and solve this problem. By solving this problem we strengthen you in the White House. We are waiting for an answer. As we promised, we will make every effort. We are working right now. We hope to get you news about the situation tomorrow. We will finish the job without waiting for the other parts. Re- garding the agenda, we are willing to dis- cuss all the items you proposed, especially where we have mutual interest. Afghani- stan, the Soviets, Iran-Iraq War, Lebanon. We are ready to discuss. We have some objections to your positions on some of these issues. I have been appointed to rep- resent Iran in this dialogue. I hope this will be a good start." North asked whether [name deleted] thought it was possible to convince those who hold the Americans to release them? "I answered you," [the Foreign Affairs Ad- visor] replied. "They're difficult to deal with. But anything we start we are hopeful about." North said if that succeeds, the other air- craft and other things would be delivered. "Can a secret meeting be arranged with McFarlane and your leaders?" [The Foreign Affairs Advisor] said he would have to wait or come back. "You can be sure that this will be conveyed. But 10 days is so early. We believe that after the hostages are free and the deliveries completed, there will need to be more positive steps." North argued that he did not believe we should further the relationship with give and take. [The Iranian official] got bad advice. Some of the parts Iran asked for it does not need. "Why do you need twenty radars? You should fix your radars rather than buy new ones." Nir said, "we need to deliver a system that would allow both sides to exchange techni- cal data, advice, and information. A long- term system is required. Such a develop- ment can only be agreed at the top." [The Iranian official] said Nir was right. But North said the U.S. already knows what is needed. [The Foreign Affairs Advisor] said Iran worries about the Russians. "They have missiles that can reach Tehran, as well as high altitude jets. You can't compare qual- ity and quantity of our weapons. But the will of the Iranian people is greater than the Soviet people. I myself have a sister with two sons who were martyred in the war. One body was not even found. Two others are handicapped. All four were vol- unteers. I have a young brother who was not accepted as a volunteer. He took his older brother's ID when he returned from Ahwaz. Martyrdom is great. We congratu- late the family of martyrs with congratula- tions and sorrow. During Ramazan we ask God to let us be a martyr if we are to die. Ramazan is the night of fate and power. Russians sell their rifles and prisoners for cash. Such a Russian can't fight an Iranian. But if we try to get such technology to strike them they will not fight. Islam tells us to be strong to prepare to fight. Mil- lions of Soviet Moslems listen to our influ- ence. Many believe the Imam is their leader, not Gorbachev. They are real Mos- -- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 lems. Secret groups in the Soviet Union print the Koran and distribute it. Their heart is- on this side of the border. If we put aside nuclear power, we don't think Russians will take advantage of Iran. Of course everything is possible with these people." [The Foreign Affairs Advisor] continued, "We appreciate and want to discuss every- thing with you. There is $2.5 billion deal. No one knows what it is. Rafsanjani said officially Iran is ready to buy weapons from America. This was a very positive state- ment. We really find more confidence and trust in our discussions. We hope in this way we can have a general dialogue before we come to the technical level. We want TOWs, especially with technicians. Easier to operate than MILAN. We would appre- ciate your advice on F-14/phoenix and har- poon missiles. You know how our people face you in public. When the spare parts come on a large-scale, the public will natu- rally know where they come from. The Air Force, land forces, Pasdarans will see. But they don't need to know about the dia- logue, etc. Naturally, after some of this movement, our leaders could meet and accept this change officially. We rule on the basis of the people. We respect our people's will. This is our policy. The people hear the Parliament. Three sessions a week. We have to prepare the people for such a change. Step by step. We need to prepare the nation. Meetings between U.S. and Iranian leaders will take place publicly in this context. If you are serious about solving problems, I am sure official trips and high-level meetings will take place. The Imam has said we are ready to estab- lish relations with all the world except Israel. But you have to remove the obsta- cles. This is why we are ready to discuss the agenda as you gave it with some changes. Speed up what has been agreed. You are a real superpower. I hope you don't mind being a superpower. You have much more capability. A few 747s can carry a lot in one day. We would be very pleased to discuss our specific needs." Teicher asked why the meetings cannot take place now. "Rafsanjani has acted and spoken in a way that indicates Iran could benefit from a dialogue. [The Foreign Af- fairs Advisor] just stated that the Imam said Iran is ready to establish relations with all the world except Israel. What is the problem?" [The Foreign Affairs Advisor] explained that the leadership is affected by people and influences people. It is an interactive condition. "It's not whatever the Imam says. His word is accepted because he talks from the heart of the people. This is why the leadership of Iran is not something dogmatic. It is not a dictatorship, religious or otherwise. The leadership depends on wisdom of public opinion. After death of Brezhnev, Iran sent a delegation. The lead- ership was attacked by the nation for this act. No one went out to Chernenko's fu- neral. If you are serious, everything can be solved." North said, "The U.S. wants to help Iran so others won't attack it. We need to work to broaden this understanding. I will urge McFarlane to meet with [The Foreign Af- fairs Advisor]. He doesn't always take my advice. Such is the fate of all advisors." North also asked the Iranian delegation to consider whether Iran would want the U.S. Government to express appreciation to Iran if four Americans go free. [The Iranian official] said, "Understanding can lead to action." [The Foreign Affairs Advisor] proposed re- convening at 10:00 a.m. on May 27 to review the agenda. "We should keep the Iranian experts out for now to keep the numbers small. Let us keep it political. We can decide later if experts are to be includ- ed. That agenda may be different. We will decide on a framework to implement what we agree to and how to establish secure communications. That will require high- level agreement." The meeting ended at 1:50 a.m. B-111 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 PARTICIPANTS: U. S. Oliver L. North George Cave Howard R. Teicher Iran [Senior Foreign Affairs Advisor] [Assistants to the Prime Minister] DATE: May 27, 1986 PLACE: Tehran, Iran, Independence Hotel TIME: 10:00 a.m. North expressed the U.S. team's gratitude that discussions can be continued. He noted that he had recommended that McFarlane meet with [the Foreign Affairs Advisor]. [The Foreign Affairs Advisor] said there was some news about the hostages. "We heard early. But I felt you were sleeping. There is a development which requires a decision. Our messenger in Beirut is in touch with those holding the hostages by special means. They made heavy condi- tions. They asked for Israel to withdraw from the Golan Heights and South Leba- non. Lahad must return to East Beirut, the prisoners in Kuwait must be freed, and all expenses paid for hostage-taking. They do not want money from the U.S. Iran must pay this money. We told them these condi- tions must be reduced. We can't make this work. We are negotiating. We are ready to pay for humanitarian reasons. We are ne- gotiating other conditions. We are hopeful these negotiations will succeed." [The Iranian official] complained that "only a portion of the 240 spare parts had been delivered. The rest should come. This is an important misunderstanding." (McFarlane called [the Foreign Affairs Ad- visor] down to his suite at this point in the discussion.) North said, "The U.S. would provide the additional items on [the Iranian official's] list to the extend [sic] we can as soon as possible if they're still made. As soon as possible relates to funding. Even with countries where we have formal military ties, our law requires prior payment." [The Assistant to the PM] opined that "many things are not written in law. In the same way we can finance your hostages you can find a way to finance our pur- chases." Teicher explained how the U.S. Government sells military , equipment, especially the interaction between the Congress and the President. "Our current sales to Iran are not following normal procedures and cannot be routinized." Nir asked whether it might be agreed that "since the U.S. Government cannot deliver without advance payment and Iran cannot pay in advance, we will examine mid-term financial arrangement possibilities, such as Ghorbanifar and oil deals?" On this note, the discussion broke up into separate lengthy corridor talks. After the Iranians departed, around noon, McFar- lane stated that [Foreign Affairs Advisor] understood what steps Iran must take to restore U.S. confidence. But he referred to some sort of documents or letters held by Ghorbanifar. No member of the U.S. team was aware of these letters. McFarlane had emphasized that he must shortly leave, and that an opportunity for improved relations was being wasted. McFarlane said he would draft a MEMCON of his one-on-one dis- cussion. Lunch was served at 12:30 p.m. Please deliver the following message from Robert McFarlane to-Admiral Poindexter as soon as possible. I have just completed a three hours one on one meeting with . . . the official desig- nated by Rafsanjani/Musavi and Khamenei as their spokesman and whom I mentioned in my first cable which you received this morning. It was a useful meeting on the whole. I say that in the sense that I was able to present a thorough foundation brief of our pur- poses and priorities internationally with specific explanation of our goals and inten- tions in the Middle East generally and with specific regard to Iran. I made clear that regarding Iran we sought a relationship B-112 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 based upon mutual respect for each other's sovereignty, territorial integrity and inde- pendence; that we believed in non inter- vention in the affairs of all states (and ex- pected them to do the same thing). I then developed a brief of our sense of the Soviet objectives in the Middle East which are to expand its influence so as to ulti- mately be in the position to disrupt the re- source flows of the area and exploit its ge- ography for self interest. It's instruments for achieving these goals are the radical Arab states. . . . The Soviets would go to considerable length to prevent Iraq from losing to Iran, for if they did lose, Soviet credibility would be catastrophically dam- aged in the area. We would expect the So- viets to give Iraq all the support they needed and if this were not enough, then they would pressure Iran directly with mili- tary force. I went on to explain that our policy re- mained to seek an end to the war and not to favor victory by either side; in their case since we were concerned for what their larger purposes were in the Middle East. On the surface they appeared to us to be determined to expand their influence through the spread of Islamic fundamental- ism, relaying (sic or sp) on the use of ter- rorism to achieve their purposes. Conse- quently, I stated that they should under- stand that we were not prepared to give them a level of arms that would enable them to win the war. That said, however, we were prepared to enter a dialogue to determine where there might be common interests and that Af- ghanistan appeared to be a leading case in point. We would also want to discuss Nica- ragua (and their support for the Sandinis- tas) as well as Lebanon. Finally, I proposed a specific work pro- gram to try to inject a little momenium [sic] into the process. As a first item, I pro- posed that both sides lower the rhetoric toward the other (although we would con- tinue to call it as we saw it if terrorist acts were committed against Americans by Ira- nians). As a second measure, I proposed that we commit now to a sustained political dialogue in an effort to bridge differences here [sic] possible (even though some dis- agreements would remain eternal). This meeting should be secret but could take place within two weeks either here in Tehran or in a third country or in the U.S. Finally, I stated that since the Russians were no doubt monitoring the telephone calls that had been the basis of bringing us to this point, it would be wise to take direct secure means of communications and that could be done very easily. I also stated that while we could not envision providing a significant level of arms, that we might consider having a technician visit and remain on site to help them get more from what they have (as you know he lis- tened attentively and then responded in low key fashion. Stressing that there are a number of areas where we have fundamen- tal disagreements but also a number of areas where there are common interests. He went through the areas of disagree- ment but in a rather pro forma fashion. He then got to the clincher-their efforts to free the hostages in Lebanon. He reported that Hizbollah had made several precondi- tions to the release: 1. Israeli withdrawal from the Golan; 2. Israeli withdrawal from Southern Lebanon; 3. Lahad movement into East Beirut and 4. some (undefined) to pay the bills the hostages have accumu- lated. How's that for Chutzpah!!! He hur- riedly added (before I unloaded on him) that "these demands are not acceptable and we are negotiating with them and be- lieve that the only real problem is when you deliver the times we have requested." I responded that I was glad to hear that his government wanted to solve problems and set a political dialogue in motion but that I had to say that the other matters he had stated led me to believe that such a dia- logue would never get started at all. I then explained for him the history of how we have reached this point (bearing in mind that he has been getting only the Gorba/ [Tehran contact] versions). I then carefully recounted how in the course of the past year, we had negotiated agreements only to have them altered at the last moment or delays imposed which had led to an ex- tremely high level of frustration on the B-113 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 part of the President and that he had only reluctantly agreed to this meeting under a very clear and precise understanding of the arrangements. I then went over in detail what those arrangements were: 1. The U.S. would send a high level delegation to Tehran. They would bring with them a portion of the items they had requested and paid for (which we had done). 2. Upon our arrival, they had agreed to secure the release of the hostages promptly. 3. Upon release of the hostages to our custody, we would call forward the balance of items that had been paid for and those that had not been paid for would be dispatched as soon as payment had been received. At this point he became somewhat agitated wanting to know just who had agreed to these terms. (I fingered Gorba and [his contact in the Prime Minister's office]). He stated that these were not the terms as he understood them. The basic difference was that they expected all deliveries to occur before any release took place. I stated firmly that while misunderstandings happen, I was confident that it had not been our side for we had two witnesses to the agreement. More importantly, however, regardless of misunderstandings, there was simply no latitude for altering the agree- ment at this time. Due to the tortured his- tory I had recounted, the President had reached his limit of tolerance and that this visit was the last attempt we would make. My instructions were to return tonight to Washington. I stressed that we were pre- pared to call the other aircraft forward as soon as we received word that the hostages were released and even to do so within a couple of days after we had left if they were not released tonight but there was no possibility of changing the terms. He was obviously concerned over the very real possibility that his people (Gorba and [his Tehran contact] had misled him and asked for a break to confer with his col- leagues. I agreed noting that I had to leave tonight. (Actually, I don't have to leave to- night but recognizing that we have been here for three working days and they have not produced I wanted to try to build a little fire under them.) Right now they are under the understanding that we will all be leaving. They asked whether I could leave anyone behind and I said no. Separately the rest of our delegations had been meeting to go over a letter that they had drafted which purported to show what we had agreed to in Frankfurt. This had been discussed last night as well, with Gorba basically, convincing an increasingly uncomfortable [Iranian official] that our in- terpretation was surely plausible to him. Ollie, Cave and Nir are all confident of their ground but understand the probabili- ty that Gorba or [the Iranian official] or both oversold their accomplishment. At this point it is hard to know where this will lead. We have heard nothing from Beirut-have you? I tend to think we should hold firm on our intention to leave and in fact do so unless we have word of release in the next six or seven hours. I can imagine circumstances in which if they said tonight that they guarantee the release at a precise hour tomorrow we would standby, but not agree to any change in the terms or call the aircraft forward. Please convince [sic] this to the President and we will proceed as directed. My judg- ment is that they are in a state of great upset, Schizophrenic over their wish to get more from the deal but sobered to the fact that their interlocutors may have misled them. We are staying entirely at arms length while this plays out. We should hear something from them before long! Howev- er, when you get word it may be best if you call me on the prt 250-Bob Earl can arrange it for you. Warm regards to all. PARTICIPANTS: U. S. Robert C. McFarlane Oliver L. North George Cave Howard R. Teicher Israel Amiram Nir Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Iran [Senior Foreign Affairs Advisor] [Assistants to the Prime Minister] DATE: May 27, 1986 PLACE: Tehran, Iran, Independence Hotel TIME: 5:00 p.m. [The Foreign Affairs Advisor] began the discussion with a report from Beirut. "The last contact with our man in Lebanon re- ported that he was able to eliminate three demands: the withdrawal of Israel from the Golan, South Lebanon and the transfer of Lahad to East Beirut. The people who hold the hostages believe they can solve the world's hunger problem! We will solve the money problem. The only remaining problem is Kuwait. We agreed to try to get a promise from you that they would be re- leased in the future. The only problem is that the men here are not in agreement. These documents are in Ghorbanifar's handwriting. This is what I told you about this morning. If there has been a mistake in our agreement, it is not our fault. Maybe Ghorbanifar made a mistake. The problem is very simple. The only thing to discuss is what comes first and what comes later. The intentions of the two groups, based on what's written here, leads me to believe that agreement should be possible. I think we can come to a final agreement since you are an important person in your coun- try. We, like you, want to solve this prob- lem and get on with it." McFarlane said it is apparent the Irani- ans are making a determined effort to bring this problem to a conclusion. "I am grateful. This spirit, if it had been present in our first encounter, would have made clear we could reach some agreement. Unfortunately, we have reached this point after a year and three efforts where we thought we had an agreement. This has affected the President's view of our ability to reach an agreement. He kept trying due to his belief that there were larger prob- lems we should turn to. This affected his faith in our ability to work togeth- er. So he was willing to try once more and he believed we had come to an agreement. But his instructions in sending me here were that if this fourth try did not achieve results it was pointless to pursue an ineffective dialogue. I can understand that there may have been misunderstandings and I don't point to any bad faith. But my President's instructions are firm: with- out results we are to discontinue the talks. These are very firm instructions. All the items that have been paid for are loaded and posed for release the minute the hostages are in our custo- dy. Their prompt delivery within 10 hours is our solemn commitment. With regard to the problem raised by the captors, the Da'Wa prisoners, it is much on our mind as it has been raised before. Our position is derived from our policy which respects all na- tions' judicial policies. We cannot ignore their process. I am sad to report all this. I respect what you said. I will report to my President but I cannot be optimistic." [The Foreign Affairs Advisor] proposed a slight change, "Since the plane is loaded why not let it come. You would leave happy. The President would be happy. We have no guilt based on our understanding of the agreement. We are surprised now that it has been changed. Let the agree- ment be carried out. The' hostages will be freed very .uickly. Your President's word will be honored. If the plane arrives before tomorrow morning, the hostages will be free by noon. We do not wish to see our agreement fail at this final stage." McFarlane underscored "how much I appe- ciated your statement of your country's op- position to hostage-taking. Such behavior is inconsistent with your country. Bearing in mind the possible misunderstanding, can we separate the issue? As a humanitari- an gesture? We delivered hundreds of weapons. You can release the hostages, advise us, and will deliver the weapons." [The Foreign Affairs Advisor] said, "OK." "But he (presumably Rafsanjani) would like for the staff to reach an agreement on what's been previously worked out. He wants your agreement for the staff to work Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 out an agreement. This will be a difficult task. Might be difficult to get it done to- night. Can extend you stay [sic]? Or per- haps just the staff. Perhaps if we can reach agreement on this the staff can stay and complete the work?" McFarlane expressed appreciation for [the Foreign Affairs Advisor's] willingness to try to work out an agreement. "I will seek the President's decision. I cannot know what he will say. But, I should say in his most recent communication he pointed out I have been here three days. It should have been enough. But I will report again." [The Foreign Affairs Advisor] suggested trying to solve the problem as fast as possi- ble. "We will try to do it in a manner that will please your President. Problems like this can only be solved at the last minute. With all the problems we have, we want to solve them in a good atmosphere. They call us liberals, but revolutionaries do not accept this. The staffs must reach a mutu- ally acceptable solution, then the problem will be solved. Something is apparent in our letters. I am not blaming the staffs. We want to reach a new understanding." McFarlane agreed to try, while noting that "staff agreements must be approved by our leaders." The meeting ended around 6:00 p.m. PARTICIPANTS: U. S. Oliver L. North George Cave Howard R. Teicher Israel Amiram Nir Iran [Senior Foreign Affairs Advisor] [Assistants to the Prime Minister] DATE: May 27 PLACE: Tehran, Iran, Independence Hotel Time: 9:30 p.m. North thanked [the Foreign Affairs Advisor] for returning the passports. He also stated that the plane needs gas. [The Foreign Affairs Advisor] directed [the Iranian official] to take care of it. North then presented the draft proposal for the evolution of relations, noting that "McFarlane is not pleased, but he gives Iran until 0400 to consider this proposal." ([Foreign Affairs Advisor] and his aids studied it. Their faces displayed anxiety. They each ask about the timing of deliv- eries. They repeatedly ask each other about the spare parts.). [The Foreign Affairs Advisor] asks "How are we supposed to free the hostages by 0400?" [The Assistant to the Prime Minister] ac- knowledged that they are in contact with those who hold the hostages. "We are ne- gotiating. There is still a lot of work to do. We cannot make a final decision on when they will be released!" North said he did not understand the timing problem. "With McFarlane earlier today you told us they would be free by noon." [The Foreign Affairs Advisor] agreed he had said that earlier today. But it is now late. Our dispute is over the lack of com- plete agreement. What can you say about the [sic] held in Kuwait?" North proposed a statement like: "The U.S. will make every effort through and with international organizations, private individ- uals, religious organizations, and other third parties in a humanitarian effort to achieve the release and just and fair treat- ment for Shiites held in confinement, as soon as possible." The Iranians ask to think about the pro- posal. McFarlane and [the Foreign Affairs Advisor] meet privately. About 11:30 p.m., after more wrangling between McFarlane and [The Foreign Af- fairs Advisor], McFarlane concludes that they're just stringing us along. He gives the order to pack and depart. We discov- ered 15 minutes earlier that all day the plane was not refueled, leaving us semi- stranded. The pilot is now en route to refuel. The meeting ends at 11:40 p.m. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 U. S. Robert C. McFarlane Howard Teicher Oliver North Iran Senior Foreign Affairs Advisor DATE: May 28, 1986 PLACE: Tehran, Iran, Independence Hotel TIME: 2:00 a.m. [The Foreign Affairs Advisor] asks for a delay until 6:00 a.m. They will get answer on the hostages by then. McFarlane replies that if "you give us a time we will launch the aircraft so that it will land here two hours after the hostages are in U.S. custody." [The Foreign Affairs Advisor] said he would be back in touch before 6:00 a.m. The meeting ended at 2:10 a.m. PARTICIPANTS: U. S. Robert C. McFarlane Oliver L. North George Cave Howard R. Teicher Israel Amiram Nir Iran [Senior Foreign Affairs Advisor] [Assistant to the Prime Minister] DATE: May 28, 1986 PLACE: Tehran, Iran, Independence Hotel/ Mehrabad Airport TIME: 7:50 a.m. The Iranian official appears at 7:50 a.m. Regarding the hostages, he says, "they think two can get out now but it will re- quire `joint action' on the other two." McFarlane says, "It is too late. We are leav- ing." [The Foreign Affairs Advisor] arrives at 8:00 a.m. He repeats the proposal made by [the Iranian official]. McFarlane tells him it won't work. "You are not keeping the agreement. We are leaving." They try to slow us down but McFarlane has made up his mind. By 8:00 a.m. we are on our way to the airport. As we board the aircraft [the Iranian offi- cial] pleads, "Why are you leaving?" McFarlane told him to tell his "superiors that this was the fourth time they had failed to honor an agreement. The lack of trust will endure for a long time. An im- portant opportunity was lost." We left Tehran at 8:55 a.m. These memoranda were distributed to the State and Defense Departments, CIA, and JCS in De- cember 1986. (Teicher to McDaniel, 12/11/ 86.) George Cave, using his alias "O'neil", also made a record of the meetings. He noted that Tuesday was a day of marathon negotia- tions with the Iranians stalling for time and trying to get the most out of the American delegation. The American delegation stuck by the terms of the original agreement and insisted that after the terms of the Frank- furt agreement were met, we would meet and discuss in detail their needs and the outline of our two countries' future rela- tions. The American delegation proposed a specific timing for a subsequent meeting. During the late afternoon it was agreed that the American team would draw up an agreement which would be discussed later in the evening. To save time O'neil began working on a translation which was later completed by he and Gorba. During Tuesday's negotiations, all the de- mands of the hostages holders evaporated except for the demand for the release of the Shi'ite prisoners in Kuwait. Goode [North] handled this part of the negotia- tions by firmly stating that the United States would not interfere in the internal affairs of Kuwait, particularly in an instance where Kuwaiti due legal process had been carried out. We would however seek to better the condition of the Shia prisoners through the good offices of international organizations such as the Red Cross and the Red Crescent. Goode warned that as far as the well being of the Shi'ite prison- ers in Kuwait was concerned, there had Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 better not be any more terrorist activity di- rected at the Royal family in Kuwait. The draft agreement was the subject of in- tense negotiations with the Iranians making some counter proposals which were designed to gain them more time. Talks broke off around midnight with the Iranian delegation saying it wanted to caucus. For the next two hours, heated dis- cussions were held within the Iranian dele- gation. [The Iranian officials] both said that the other would be responsible if nothing comes of the negotiations. Finally, shortly before two on Wednesday morning, [the Assistant to the PM] asked to see McFarland [sic]. He wanted assurances that we would deliver the remaining spare parts two hours after the hostages were released, and would stay after the arrival of the spare parts to discuss additional Iranian needs. He also asked for more time to get control of the hostages. McFarland gave [the Assistant to the PM] until 0630 wednesday [sic] morning to arrange for the release of the hostages. The American del- egation retired to grab a couple of hours sleep knowing that we had at least out-fraz- zled them. Cave's account terminated with the last con- versations before the delegation returned to Israel. Washington reported before they left that it had seen no evidence that "the hostages were about to be released or that anything un- usual was taking place." (Id.) The agreement drafted during the evening of May 27 provided: On this twenty seventh day of May 1986 and the sixth day of Khordad in the year 1365, the Government of the United States of America and the Government of the Is- lamic Republic of Iran, in a spirit of mutual understanding, and recognizing the importance of building respect, trust and confidence hereby agree to the following sequence of steps designed to lead to a new era of bi-lateral relations: (1) The United States Government will cause a 707 aircraft to launch from a neutral site at 0100 in the morning to arrive in Tehran, Iran at 1000 on the morning of May 28, the seventh day of Khordad. This aircraft will contain the remainder of the HAWK missile parts purchased and paid for by the Govern- ment of Iran, a portion of which was delivered on May 24. (2) The Iranian Government, having recognized the plight of the hostages in the Lebanon, and in the spirit of humanitarian assistance, agrees to cause the release and safe return of the living American hostages and the return of the body of the deceased American and that this release will be completed not later than 0400 Tehran time. (3) It is further agreed by both sides that if by 0400 Tehran time, the hos- tages are not safely in the hands of U.S. authorities, the aircraft with the HAWK missile parts will be turned around and will not land in Iran and the U.S. delegation will depart Tehran immediately. If, howerver [sic], the hostages are released at 0400, as indi- cated above, the U.S. delegation will remain in Tehran until 1200 Noon on May 28, 1986. (4) The Government of the United States commits to deliver to Bandar Abbas, Iran, two phase one IHIPIR radar sets, fully compatible with the HAWK missile system now in the pos- session of the Iranian government. This delivery to take place after the ar- rival of the hostages in U.S. custody and within ten days after the receipt of payment through existing financial channels for these radar systems. It is further agreed that the government of the United States will make every effort to locate and identify those items from the original list of 240 parts which were not immediately available, and to provide those avail- able as soon as possible after payment is received and the hostages are in U.S. custody. (5) Both Governments agree to a con- tinuation of a political dialogue to be conducted in secrecy until such time as both sides agree to make such a dia- B-118 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 logue public. It is agreed by both sides that this dialogue shall include discus- sions on the Soviet threat to Iran, the situation in Afghanistan, Nicaragua, and other political topics as may be mutually agreed. Both sides agree in advance that these discussions will in- clude consideration of further defense needs of Iran. (6) Both Governments recognize that the lack of a clear channel of commu- nications has contributed to misunder- standing and confusion in the past and agree that this problem is best re- solved by having the United States provide a secure channel of communi- cations between our two governments by placing a secure satellite communi- cations team, and appropriate equip- ment secretly in Tehran. The Government of Iran agrees that the U.S. communicators will be ac- corded normal diplomatic privileges and immunity on an informal basis and without attribution. Cave's report ended with comments and a recommendation, including: 2. It is quite possible that the Iranian side was negotiating under the impression that we were only interested in a deal for the hostages. This would explain why they tried so hard to get us to do more in ex- change for the hostages, i.e., the 20 hawk [sic] batteries and 18 additional hipar radars. It was therefore a good idea to leave a translation of the draft agreement with them as it will give them something to chew on. McFarlane issued a stern warning that we are getting fed up with overatures [sic] from them that don't pan out. We are interested in a long term political and stra- tegic relationship, and if Iran does not pick up on this opportunity it may be years before there is another one. 3. Ramadan was certainly a factor in how the negotiations went. also [sic] the prob- lem caused by not being able to see anyone in a position of power. The people we were negotiating with were a couple of rungs down the ladder. The fact that [the Iranian official's] breath could curl rhino hide was no help either. On the positive side was the change in the attitude of the Iranian delegation. By tuesday [sic] they were begging us to stay. 4. We also may have the problem of the dishonest interlocutor. The Iranian side made it clear that one of the problems in our negotiations was the fact that prior to our meeting, Gorba gave each side a dif- ferent picture of the structure of the deal. O'neil made the point to [the Assistant to the Prime Minister] that the letters they re- ceived [sic] were from Gorba, not the U.S. government. We will have to lean heavily on Gorba in the future. 5. Since both Gorba and [the Iranian offi- cial] stand to make a lot of money out of this deal, they presumably will work hard to bring it off. Gorba has very special rea- sons for seeing that the deal goes through. The serious problem we must address is whether the Iranians can gain control of the hostages. The French don't think they can. This could be our real problem. The Iranian side may be most willing, but unable to gain control. RECOMMENDATION Through hindsight it would have been better for Goode and O'neil to have gone in first to handle the initial negotiations. We should not have subjected a senior U.S. official to the indignities he was forced to endure. We have made the point to the Iranians that the draft agreement must be finally negotiated by senior re- sponsible officials from both sides. If we have a subsequent response from the Irani- an side it is strongly recommended that Goode and O'neil meet with the Iranian side somewhere in Europe to continue the negotiations. (May 1986 Hot Docs.) E. Post Mortem Most American accounts of the meetings conform more or less faithfully to the contem- poraneous written record. Ghorbanifar's ac- count is different. B-119 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 According to Ghorbanifar, the meetings started badly because they were inadequately prepared. Ghorbanifar proposed that North and he go to Tehran first to prepare the way. The Americans refused. (Ghorbanifar 161) Ghorbanifar's Iranian interlocutors were in- credulous at the notion that McFarlane would arrive without preparation, but agreed to wel- come him "if he comes with the, whole of what he has promised to come here, the spare parts, okay." (Id. at 162. See also 168) The American delegation arrived two hours earlier than Ghorbanifar thought they would; as a result, they waited an hour and a half at the airport until the Iranian officials arrived. (Id. at 163-64) From the beginning, the Iranians were disappointed that the Americans had brought less than all the spare parts alleged to have been promised. Ghorbanifar recalled that the Americans raised the hostage question as something to be resolved. before progress could be made on other subjects, and that this condition was mentioned for the first time since February. (Id. at 165-66) Ghorbanifar stressed that McFarlane's arrival and treatment were remarkable in light of the recent history of Iranian-American relations and the fate of Iranian officials such as Barzagan who met with American officials. They discussed cooperation against the Soviet Union, which also was re- markable. This fact contradicts, Ghorbanifar said, the image of the meetings conveyed in the press as negotiations about an arms-for-hos- tages trade, facilitated by self-interested arms traders. (Id. at 166-68) Ghorbanifar remembered that Ayatollah Khomeini approved the meetings, and that he, Ghorbanifar, arranged for the head of the Majlis foreign relations committee to meet McFarlane. According to Ghorbanifar, "the Parliament is everything in Iran, the Majlis, and he is the number one for foreign affairs." (Id. at 169) This man urged McFarlane not to press the Iranians, but to give them time that we cook the way we want the Ayatol- lah Khomeini to pave the ground for this, to make it ready, prepare for him. Don't push him. From the first place, Mr. McFar- lane was insisting on we have nothing to discuss and nothing is going on to get to this agenda if the whole four American hostages are not released. . . . He waited one day. I pushed the Iranian side every day. Do something. He is here. You will have to save his face. After three days the man came to him and said, Mr. McFarlane, I have good news for you. We accepted the whole agenda, ap- proved that we go and we coordinate. And the good news to that is this: we prepared the old man. Everything is ready right now. It was seven in the evening, and I have six witnesses-Mr. Nir, Mr. North, Cave, and the other gentleman and myself. (Id. at 170-71) The Iranian said the Lebanese were proving difficult, but that it was possible to arrange the immediate release of two hos- tages. Ghorbanifar remembered that McFarlane stormed out of the room in response to this message. Nir and North eventually persuaded him to return. Despite the pleadings of the Ira- nians and what Ghorbanifar described as the "panic" of Nir and North at McFarlane's behav- ior, McFarlane behaved as if he were giving an ultimatum, Russian-style. (Id. at 171-73) The Iranians continued to plead; the Majlis foreign affairs expert said Khomeini had agreed to re- lease the hostages first, but McFarlane said no, if by six o'clock all the hostages are not out, I leave. He says, okay, take two now and give us another day. No. And he left at six o'clock. And, believe me, I saw the tears in the eyes of North, Nir, and everybody. Why he did so? I know why. I tell you why. Number one, he had $15 million in his pocket. We were a hostage to him. Number two, the Iranians, they are not real politi- cians. The people came to him. They were so soft and they were so open to him; they explained to him deeply how they are in disaster. They need the help of the United States financially-I mean the support- wise, logistic-wise, military-wise. And he is a smart guy. He found out that in such a catastrophe and that situation they are. They are really in need of it. And, besides that, he says what the hell is this. I know now all the big shots. I have their telephone number. We have relation. We go out. We have the money. We have them. We know their B-120 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 need. They will follow. Who needs this man, middle man? Who is he? So he checked out and he left. And they left the poor guys alone in Tehran. I stayed one day, two days in Tehran. I told them this issue is so big that nobody can leave it on the air. Let me go and talk to them and finalize what I can do. But there is no way I can do unless you do some- thing. First we have to do something. (Id. at 173-74) McFarlane's recollection corresponded to his contemporaneous record. In addition, he noted that the Iranians confiscated the pallet of spare parts, but that no additional delivery was made because no hostage was released. In Israel on the trip home, McFarlane was disappointed. North said well, don't be too downhearted, that the one bright spot is that the govern- ment is availing itself of part of the money for application to Central America, as I recall, although I took it to be Nicara- gua. 7 1 After returning to the United States, Cave re- membered evaluating the situation. "It was quite clear that Ghorbanifar was lying to both sides in order to blow this deal up as big as he could." (Cave 24) Cave learned from the Tehran trip that the Iranians had less control over the holders of the hostages than the Intel- ligence Community believed. He also conclud- ed that the Kuwaitis held the key to the hostage problem. American hostages would not be re- leased until Kuwait released the Dawa prison- ers. (Id. at 41-42). VIII. The End of the Beginning: June July 1986 When McFarlane's delegation returned to the United States, nearly a year had passed since the NSC staff formally floated the idea of con- 71 According to the CIA Inspector General, during the meet- ings Ghorbanifar told Cave the price of the weapons quoted to the Iranians was $24.5 million, and asked Cave to say "the price is right" if the Iranians asked. Cave informed North, and togeth- er they asked Nir about it. Nir told them "Don't worry, it in- volves other deals, and that there are enormous expenses in this operation..:." Cave had the impression that McFarlane could "`care less about' the pricing discrepancy." (CIA/IG Chronology 26) (McFarlane (1) 42) C/NE recalled that the spare parts cost the Americans $6.5 million, but that the Iranians were charged between $21 and $24 million (C/NE (1) 10-11) tacting Iranian political factions through the medium of arms. In that time, Israel and the United States sold Iran 1,508 TOW missiles, 18 HAWK missiles, of which 17 were returned, and some HAWK spare parts. In addition, the United States had provided Iran with briefings on the U.S. perception of the Soviet threat and the Iran-Iraq War. The NSC staff's involvement had been ancillary at the beginning; as time passed, the staff increasingly influenced, and then directed the operation. All those involved hoped that these transfers would lead to the release of Americans held hostage in Lebanon and form the basis for a new relationship with Iran. In this period, one American hostage had been released, and at least one had died in captivity. Whether a new relationship was being formed remained (and remains) to be seen. A. Aid to the Nicaraguan Resistance In the late spring, 1986, the Administration directed its energy to persuade Congress to fund the Nicaraguan resistance. Absent Con- gressional appropriations, the Administration looked to third countries to help the resistance pay its bills. The Assistant Secretary of State for Inter-American Affairs told the Board: [B]y spring [1986], we were running out of money. The $27 million was running out. It ran out about in June or July, and at that point, it was also clear to us that though both Houses [of Congress] had voted the 'hundred million, we weren't going to get it that fast. We knew we'd get it before or believed we'd get it before the adjournment. But, in any event, we were out of money. It was at that point that we made a solicita- tion to another government for a kind of bridge to extend the $27 million until we had the $100 million. We had discussed in the department [of State] on several occasions whether we should utilize the authority which we be- lieve we had to go to a third government. I don't remember the dates of those discus- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 sions, but the Secretary's staff has those dates. I mean, there are notes of those dis- cussions. It was in the spring-March, April, May, starting-as authority to obli- gate the $27 million ran out March 31. After that, we were dealing with the pipe- line, which we knew would last about two months, ten weeks, something like that. I got actual authority to go ahead and make a particular solicitation in July, as I recall it. There is cable traffic on this. It was from the Secretary, and we sent a cable-this was done through the embassy in that country-saying do you think they'll give, and there was a sort of back and forth with the Ambassador. The Secretary decid- ed that we should go ahead and make the request, which I then did. The actual solicitation was made by me, not by the Ambassador, in London, meet- ing with an official of that government. They ultimately said yes. Let me back up a step. Before I went off and made the solicita- tion, it was clear that they might say yes. They, after all, agreed to meet us on a matter of highest importance. I don't know whether they knew what it was going to be, but it was certainly plausible. So, we needed a place to put the money. When [sic: What] I did was to go to [the] head of the Central American Task Force at CIA and say-and I must say that I am relying on his memory of this as I don't re- member this conversation. But I asked him about it a couple of weeks ago, and so, this is his account of it. It was so how do I do this? I mean, can UNO, the Nicaraguans, the Contras, can they set up an account? How do we do this? He said yes, he would pass a message to them to set up an account, which would re- ceive any money, the number of which I would give to the foreign official, and then that would be the place that they would re- ceive the money. Chairman Tower: Set up an account where? Mr. Abrams: It didn't matter to me, and I think-I don't actually know the answer to that any more, but there are records that the CIA has-I believe the answer is Panama. Actually, they dispatched, a mes- sage was passed to an official of UNO, "Go open an account," because there may be some money being put in it. So they did that. I asked the same question more or less the same day, probably even the same hour, of Ollie North-what do I do here? I think there may be some money coming in for the Contras, can we set up an account? Again, I don't have much memory of that conversation either, and I haven't asked Ollie for obvious reasons. So I don't know what his memory, if any, is of that. At any event, at some point later, like a week later, probably, both of these guys gave the index cards with an account number and the name of the bank on it. I then went to Charlie Hill, who is the Ex- ecutive Assistant to Secretary Shultz. . . . Well, for the account number which was given to me by Ollie North, [the bank] was Credit Suisse, in Geneva.... To continue, I went to Charlie Hill, who is Executive As- sistant to the Secretary and said now what do I do? I asked both these guys and they both came up with accounts. So Charlie and I kicked it around. This was the first week in August, as I recall. We de- cided to use the account number that been provided by Ollie, on the grounds that it looked, oddly enough in retrospect, kind of cleaner because we were unsure, first of all, whether this account had any relation- ship to any other Agency account. We wanted a separate account. And, I would have to say there was probably some insti- tutional rivalry there; that is, this is some- thing State was doing, why should we get the CIA involved in the distribution of funds, because I don't know who was a sig- natory for that. I still don't-for that ac- count. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ___ Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 I then gave the account number that Ollie had given me to this foreign official. (Abrams 3-7) According to the head of CIA's Central American Task Force, the Nicaraguan resist- ance started to incur debt after they used up the $27 million; by the middle of July 1986, that debt amounted to over $2.5 million. (H/ CATF 38) This CIA official told the Board: In early August of 1986, when we were seeing this debt problem, which had been a focal point of discussion, saying my God, the resistance is going to run out of money and they are going to start starving to death; we ought to get this law passed. We knew we weren't. We were running into summer recess, even though both cham- bers had passed the bill. And we had a number of discussions about how are they going to survive for the next three months. The obvious answer was solicit some money from someplace. So State Depart- ment, who had the writ and the charter to do that, went out and looked at the possi- bilities and came up with Brunei, obvious- ly. One day I got a phone call on Thursday from Elliott [Abrams] saying we have a possibility to solicit some money from the Sultan of Brunei. Only the Secretary and I are aware of it. I am going to be making a trip. How should we deposit this money? How should we handle it? And I said, well, the best way, the mecha- nisms that I would prefer to use, which are an Agency-controlled bank account and so on and so forth, are not-the other mecha- nisms are too hard to start up. The best way to do it is to get the resistance forces, one person in particular in whom we have complete trust and confidence, to open a bank account, and you put the money in a bank account and make him accountable to you for how it's used. And he said that sounds like a good idea. I'll open a bank account. So I got hold of this particular individual and asked him to open a bank account in the Bahamas. I wanted to stay away from Cayman Islands and Panama. And he did open up a bank account and had it co-signed with his fi- nancial officer. And I gave Elliott the ac- count number. And that's all. I subsequently asked the individual if any money had been deposited and asked El- liott if he thought the mission had been successful, and the answers to both were, Elliott, I don't know, and to the individual, he said no, no money has been deposited. We subsequently checked and no money was deposited in that account. And that's the last I thought or heard of it until ... I received a phone call [from the Deputy Director for Operations] saying, my God, did you give Elliott a bank ac- count in Geneva. And do you have a pri- vate bank account in Geneva? And I said no, who are you talking about? Well, the FBI says that you gave Elliott a bank ac- count in Geneva, to which Elliott deposited $10 million from the Sultan of Brunei, which is missing. And I said, wait a minute, something's badly wrong here. That was the first time I knew that Elliott-then we got it sorted out after about a few hours of almost fran- tic phone calls, and it was the first I knew that Elliott apparently had gotten another, allegedly had gotten another bank account from Ollie North in Geneva. General Scowcroft: He didn't tell you he was not going to use your account? [Head of Central America Task Force]: No, he never told me that. That probably left me as speechless as anything in this whole endeavor, that that $10 million which we sorely needed and still do need-I mean, it would be the margin of comfort even in today's operation-went into a bank ac- count in Geneva and disappeared. It just left me durristruck and still does. I still find it hard to believe. (H/CATF 44-47) On June 10, 1986, early in the process thus described to the Board, North wrote Poin- dexter: Hopefully you have by now been informed that UNO/FDN safely released the eight West Germans this evening just before dark at the religious commune at Presillas. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Franklin is headed North in attempt to get across the Rama Rd before the Sandinistas can close in on him. At this point the only liability we still have is one of DEMOCRA- CY INC.'s airplanes is mired in the mud (it is the rainy season down there) on the secret field in Costa Rica. They hope to have it out by dawn. On a separate but re- lated matter: The reason why I asked to speak to you urgently earlier today is that Ray [?Burghardt] called Elliott Abrams re- garding the third country issue. Elliott has talked to Shultz and had prepared a paper re going to [other third countries] for con- tributions. Elliott called me and asked "where to send the money." I told Elliott to do nothing, to send no papers and to [sic] talk to no one further about this until he talks to you. He is seeing you privately tomorrow. At this point I need your help. As you know, I have the accounts and the means by which this thing needs to be ac- complished. I have no idea what Shultz knows or doesn't know, but he could prove to be very unhappy if he learns of these others countries aid that has been given in the past from someone other than you. Did RCM [McFarlane] ever tell Shultz? I am very concerned that we are bifurcat- ing an effort that has, up to now, worked relatively well. An extraordinary amount of good has been done and money truly is not the thing which is most needed at this point. What we most need is to get the CIA re-engaged in this effort so that it can be better managed than it now is by one slightly confused Marine LtCol. Money will again become an issue in July, but prob- ably not until mid-month. There are sever- al million rounds of most types of ammo on hand and more ($3M) worth on the way by ship . . . Critically needed items are being flown in from Europe to the expand- ed warehouse facility at Ilopango. Boots, uniforms, ponchos, etc. are being [sic] pur- chased locally and Calero will received $500K for food purchases by the end of the week. Somehow we will molify the wounded egos of the triple A with not being able to see RR. We should look to going back to a head of an allied govern- ment on the blowpipes if we are going to do anything at all about outside support in the next few days, and I wd love to carry the letter from RR . . . if we are going to move on something. Meanwhile, I wd rec- ommend that you and RCM have a talk about how much Sec Shultz does or does not know abt [third country assistance ap- proaches] so that we don't make any mis- takes. I don't know [one of those govern- ments] knows since Fred never told me. At this point I'm not sure who on our side knows what. Help. (North PROF note to Poindexter, 6/10/86, 23:21:54) Poindexter replied: Out of the last NSPG on Central America Shultz agreed that he would think about third country sources. I wanted to get an answer from him so we could get out of the business. As I understand the law there is nothing that prevents State from getting involved in this now. To my knowledge Shultz knows nothing about the prior fi- nancing. I think it should stay that way. My concern was to find out what they were thinking so there would not be a screw up. I asked Elliot at lunch.72 He said he had recommended Brunei where Shultz is going to visit. They have lots of money and very little to spend it on. It seems like a good prospect. Shultz agrees. I asked Elliot how the money could be transferred. He said he thought Shultz could just hand them an account number. I said that was a bad idea not at all letting on that we had access to accounts. I told Elliot that the best way was for Brunei to direct their em- bassy here to receive a person that we would designate and the funds could be transferred through him. Don't you think that is best? I still want to reduce your visi- bility. Let me know what you think and I will talk to George. I agree about CIA but we have got to get the legislation past. 72 Burghardt wrote [Poindexter] at this time[?]: I understand that Elliott [Abrams] briefed you today on where this stands ["aid for freedom fighters"]. If we do not get a positive response fairly soon from the Saudis or Brunei, I would advocate moving right away. . . . I can understand the reluctance to incur a debt, but it would be almost a sure thing and we will definately [sic] need the $10 M bridge money. With the House scheduled to take up the issue on the 24th, Senate approval would be after the July 4 recess and the date of delivery keeps fading into the distance. (Burghardt PROF note to [?Poindexter], reply to note of 6/9/86) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 (Poindexter PROF note to North, 6/11/86.) In another message, Poindexter added: "We should not mention Brunei to anybody. elliot said only shultz and hill are aware." [sic] (Poin- dexter PROF note to [?Burghardt]): "With respect to private solicitations," Abrams told the Board, we never did any of that. As a matter of fact, the state of our knowledge of that was limited. We had intelligence reporting, which improved over time as the restric- tions on what the Agency could do with the Contras were reduced. We had better information on what was being received, better in 1986 than in 1985. We in the department never made any other solicitation for anything from any- body. One time, this summer, I would say, General Singlaub called me from Asia . . . and said I can get some aid for the Con- tras, through me, if you will just sort of let this foreign government know, just tell their ambassador-I don't remember who I was supposed to tell-this is official. I said I can't do that. It's just not right; I can't do that. He said well, then, I'm going to blow it. But I just couldn't do that. So that was the only other time when I was asked, in a sense indirectly, to solicit, and said no. We had virtually no, we had no informa- tion on who was paying for it. CIA people have testified that they were able to trace money back to secret bank accounts but couldn't get behind the bank secrecy laws; and they have testified that they knew the arms were coming from [a foreign coun- try]; that is to say, the last stop before Central America . . . , but they could not go beyond that and find out who was paying. Well, I have to say that we did not think it was our job to find out who was paying, since it seemed to us, as long as it didn't violate the Neutrality Act or the Arms Export Control Act that it was legal and proper. Once or twice we, in particular, actually CIA and not State, came up with some facts that indicated a violation of the Neu- trality Act, a shipment of arms from the U.S., and we reported that to the Depart- ment of Justice. But we did not engage in nor did we really know anything about this private network. We knew that it existed. We knew it in part because somebody was giving the Contras guns. We knew it also because you couldn't be in Central America and not know it. We have significant military assistance through El Salvador via Ilopango Airport, which is the Salvadoran Airport. Also, we ran a good proportion of the $27 million in humanitarian aid through Ilo- pango Airport. (Abrams 11-13) Congress authorized $100 million in assist- ance to the Nicaraguan resistance at the end of June 1986. In June, the pressures on North worried McFarlane. He wrote Poindexter that [i]t seems increasingly clear that the Demo- cratic left is coming after him [North] with a vengeance in the election year and that eventually they will get him-too many people are talking to reporters from the donor community and within the adminis- tration. I don't [know] what you do about it but in Ollie's interest I would get him transfered or sent to Bethesda for disabil- ity review board (appartwently [sic] the Marine Corps has already tried to survey him once[)]. That wuld [sic] represent a major loss to the staff and contra effort but I think we can probably find a way to con- tinue to do those things. In the end it may be better anyway. (McFarlane PROF note to Poindexter, 6/10/86) Poindexter indicated he would think about McFarlane's concern. (Poindexter PROF note to McFarlane, 6/11/86) In the middle of July, Poindexter asked to see North. After the meeting, North wrote: The opportunity to discuss the Central America issue with you was welcome and at the same time, disturbing. In view of last Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 night's CBS piece and this morning's ap- palling Washington TIMES item, I can un- derstand why you may well have reserva- tions about both my involvement in Nicara- gua policy and even my continued tenure here. Since returning a few minutes ago I have been told that even my luncheon en- gagement with my sister yesterday is in question. Under these circumstances, and given your intention that I extricate myself entirely from the Nicaragua issue, it prob- ably wd be best if I were to move on as quietly, but expeditiously as possible. I want you to know that it is, for me deeply disappointing to have lost your confidence, for I respect you, what you have tried to do and have enjoyed working with you on a number of issues important to our nation. On the plus side of the ledger we have had a close relationship on several initiatives that could not have been accom- plished without absolute trust between two professionals. At the same time you should not be expected to retain on your staff someone who you suspect could be talking to the media or whom you believe to be too emotionally involved in an issue to be objective in the development of policy op- tions and recommendations. I know in my heart that this is not the case, but as I said in our discussion yesterday, we live in a world of perceptions, not realities. I have taken the liberty of forwarding to you a memo transmitted two weeks ago which I wd like to be sure you have had a chance to see - mostly because it predates the cur- rent controversy. I want to be sure that you do indeed know that I have and will continue to tell you the truth as I see it- for I deeply believe that this is the only honorable thing to do. That this, and the relationships established in the region over the past five years are no longer enough to enable me to serve in the various policy fora on Nicaragua is, for me, unfortunate. Nonetheless, I consider myself to have been blessed to have had the chance to so serve for as long as I did. Finally, to end on a substantive note, you should be aware that Gen Galvin will be here for DRB ses- sions on Mon & Tues next week and wd vy much like to have the chance to meet pri- vately with you. He has suggested any time after 1630 on Tues, but is amenable to yr schedule as long as he will not have to absent himself from DRB sessions. Given the controversy that rages over the CINC- SOUTHCOM role in the project, I strong- ly recommend that you see him if at all possible. (North PROF note to Poindexter, 7/15/86, 12:21:30) Poindexter replied: Now you are getting emotional again. It would help if you would call Roger Fon- taine and Jerry O'Leary and tell them to call off the dogs. Tell them on deep back- ground, off the record, not to be published that I just wanted to lower your visibility so you wouldn't be such a good target for the Libs. As it has worked out both you and Vince will represent NSC on Elliot's group. Don't go intodetail [sic]. I do not want you to leave and to be honest cannot afford to let you go. By the way they are making a big mistake by calling Rod a soft liner. He disagrees with Stan Turner and Bernie as much as I do. NEW SUBJECT: I can see Jack Galvin this afternoon. Let me know how the calls go. (Poindexter PROF notes to North, 7/15/86, 14:06; 14:07:02; 14:09:02) The matter was straightened out as far as concerned North's re- lationship with Poindexter later in the month. (See North PROF note to Poindexter, 7/23/86, 15:05:39; Poindexter PROF note to North, [7/ 23/86]) Afterward, North wrote Poindexter about the need to turn over certain material in Central America to the CIA. We are rapidly approaching the point where the PROJECT DEMOCRACY assets in CentAm need to be turned over to CIA for use in the new program. The toal (sic or sp) value of the assets (six aircraft, warehouses, supplies, maintenance facili- ties, ships, boats, leased houses, vehicles, ordnance, munitions, communications equipment, and a 6520' runway on proper- ty owned by a PRODEM proprietary) is over $4.5M. All of the assets - and the personnel - are owned/paid by overseas companies with Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 no U.S. connection. All of the equipment is in first rate condition and is already in place. It wd be ludicrous for this to simply disappear just because CIA does not want to be "tainted" with picking up the assets and then have them spend $8M-10M of the $100M to replace it-weeks or months later. Yet, that seems to be the direction they are heading, apparently based on NSC guid- ance. If you have already given Casey instruc- tions to this effect, I wd vy much like to talk to you about it in hopes that we can reclama [sic] the issue. All seriously believe that immediately after the Senate vote the DRF will be subjected to a major Sandi- nista effort to break them before the U.S. aid can become effective. PRODEM cur- rently has the only assets available to sup- port the DRF and the CIA's most ambi- tious estimate is 30 days after a bill is signed before their own assets will be avail- able. This will be a disaster for the DRF if they have to wait that long. Given our lack of movement on other funding options, and Elliot [sic]/Allen's plea for PRODEM to get food to the resistance ASAP, PRODEM will have to borrow at least $2M to pay for the food. That's O.K., and Dick is willing to do so tomorrow-but only if there is reasonable assurance that the lend- ers can be repaid. The only way that the $2M in food money can be repaid is if CIA purchases the $4.5M+ worth of PRODEM equipment for about $2.25M when the law passes. You should be aware that CIA has already approached PRODEM's chief pilot to ask him where they (CIA) can purchase more of the C-135K A/C. The chief pilot told them where they can get them com- mercially from the USAF as excess-the same way PRODEM bought them under proprietary arrangements. It is just unbe- lievable. If you wish I can send you a copy of the PROJECT DEMOCRACY status report which includes a breakdown of assets. It is useful, nonattributable reading. (North PROF note to Poindexter, reply to note of 7/15/86, 14:07) B. Hostages and Iran, June- July 1986: "Stalemate" On May 29, McFarlane, North, and Teicher reported on the Tehran trip to the President, accompanied, by Poindexter, Regan, and the Vice President. They informed the President that the Iranians had asked for the delivery of all HAWK spare parts before hostages would be freed. The United States delegation had re- jected this proposal, but agreed with the Irani- ans to establish a secure communications net- work. Contact would continue. McFarlane argued that no new meeting should take place until all hostages were freed. (McDaniel log) McFarlane recalled this report to the President. I told him that I had talked to people and that while I thought that there were people legitimately oriented toward change that they had not yet gotten to a position of confident ability to act. I had not met with Rafsanjani. He must have felt vulnerable, as Mr. Brzezinski's meeting with Barzagan had led to certain consequences, and he probably was fearful about it. But that ought to tell us something and that I thought it was unwise to continue anything further. If they wanted to have political meetings that is a judgment we could make, but that there ought not be any weapons transfers. The President didn't comment really, but that was not untypical. He would often hear reports, say that he would think about it, and that was-and he didn't react to me and I left, and that's the last -I heard about Chairman Tower: And that ended your in- volvement in the matter? McFarlane: Yes, sir. (McFarlane (1) 45) On June 2, the CIA in- structed the Army "to put the radar transfer action on `hold,' a status which continued until 30 July 1986." (Army/IG Report 9) While McFarlane's delegation was negotiat- ing in Tehran, the President heard discussion about using force to free the hostages. (McDan- iel log, 5/28/86) Once North returned, Poin- 17g-29A f)-A7--7 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 dexter sought his views on the subject. He wrote North I am beginning to think that we need to se- riously think about a rescue effort for the hostages. Is there any way we can get a spy into the Hayy Assallum area? See Charlie's [Allen] weekly report [on hostage loca- tions]. Over a period of time we could probably move covertly some . . . people into Yarze. (Poindexter PROF note to [?North], 5/31/86) North was not prepared to replace the program with force. He [f]ully agree[d] that if the current effort fails to achieve release then such a mission should be considered. You will recall that we have not had much success with this kind of endeavor in the past, however. After CIA took so long to organize and then botched the Kilburn effort, Copp un- dertook to see what could be done thru one of the earlier DEA [Drug Enforcement Agency] developed Druze contacts. Dick has been working with Nir on this and now has three people in Beirut and a 40 man Druze force working "for" us. Dick rates the possibility of success on this operation as 307o, but that's better than nothing. In regard to U.S. military rescue ops, JCS has steadfastly refused to go beyond the initial thinking stage unless we can develop some hard intelligence on their where- abouts. We already have . . . one ISA offi- cer in Beirut but no effort has been made to insert personnel since we withdrew the military mission to the LAF. If we really are serious, we should start by getting CIA to put a full time analyst on the HLTF [Hostage Location Task Force] and then organizing a planning cell-preferably not in the pentagon [sic], but at CIA, to put the operation together. Dick, who has been in Beirut, and who organized the second Iran mission, is convinced that such an oper- ation could indeed be conducted. My con- cern in this regard is that JCS wd insist on using most of the tier 2 and 3 forces in such an undertaking. If you want me to task this thru the OSG we will do so, but [I] urge that we start by you having Casey staff the HLTF as there has been a certain amount of planning undertaken on this matter already. It might be useful to sit down w/ Dewey and Moellering on this after next week's OSG meeting (Thursday 1500-1600 [June 12]) if you have the time. We can probably brief you in about 20 min max. (North PROF note to Poindexter, 6/3/86, 11:42:43) At his morning national security briefing on June 6, the President is said to have approved military planning to rescue the hostages as well as reviving [previously planned efforts]. (McDaniel log) Poindexter asked the Director of Central Intelligence to intensify efforts to locate the hostages. (Poindexter to DCI, 6/19/ 86. CIA/IG Chronology 19) By July, the United States had asked Israel to help. (See North PROF note to Poindexter, 07/11/86, 07:27:44) Meanwhile, the United States knew that at least Ghorbanifar refused to treat the Tehran meeting as the end. On June 6, he pressed [his contact in the Prime Minister's office] for an- other meeting with the United States. He promised that the United States would deliver the remaining HAWK spare parts and, if Iran paid in advance, the radars. [The Iranian offi- cial] seems to have treated Ghorbanifar's advo- cacy as nothing new, to have been unimpressed with his idea, and inclined to drop the initia- tive. Claiming that Ghorbanifar told him that [the Iranian official] wanted to talk, George Cave, using his alias "O'neil," called [the Iranian] on June 13. [The official in the PM's office] said that this was not true, but "our friend" [Ghor- banifar] had been pressing him to go through with the deal. O'neil then asked what we should do about the situation. B replied that he did not know why we didn't complete the deal when in dubai [sic] [?Tehran]. O'neil inter- upted to state that he had a suggestion. We should first meet in Europe to make sure there were no misunderstandings as happened before. Then our gorup [sic] would go to Dubai [coverterm for Tehran] at an agreed upon date. Upon arrival in Dubai the four boxes [hostages] would be Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 ___ Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 turned over, then the rest of the spares would arrive and later dependeing [sic] on timeing [sic] the two Quties [coverterm for HAWK radars] would arrive. We would stay until everything was delivered. B said that the meeting in Germany was not neccessary and that deal was unacceptable to them. He proposed that we arrive with the remaining 240 spares, then two hos- tages would be truned over [sic]. When the two radars arrive, the two other hostages would be turned over. We haggled abit [sic] O'neil insisting on our deal and he insisting on his. O'neil suggested that meeting in Germany was necessary and B finally agreed that if really necessary he would come. He parrried [sic] the request that the H [?] also attend. He added that it would be very difficult to get away at this time. When discussing the possible trip to Dubai, B suggested that it was not neces- sary for the chief to accompany group that comes. Since discussion was getting nowhere, O'neil suggested that he was in [a] position to decide on B insistance [sic], and there for it best [sic] that O'neil confer with his superiors and B with his and O'neil will get back to him in one or two days. At the end B stated that it should not be that we give such importance to who does what first, once this deal is completed there are many important issues that we must dis- cuss. He again insisted on the need of the US to demonstrate good faith. O'neil asked if the hostages were now under their control because at one point B said that he did not know if their delega- tion was still in Lebanon. B hesitated to answer k-this [sic] one but said that they could get them. O'neil said "then they are in your hands" and B said they were (note O'neil doubts this is true). The next day, the Iranian official told Ghor- banifar that Iranian officials were prepared to meet American representatives in Europe if the remaining HAWK spares and radars were deliv- ered first. If all equipment were delivered, all hostages would be freed; if half the equipment, half the hostages. Ghorbanifar and his Tehran contact dis- . cussed the matter for the rest of June. On June 20, Ghorbanifar provided the Iranian official with a detailed analysis of the price and avail- ability of the remaining HAWK spare parts. Ac- cording to Ghorbanifar, 177 units would cost $3,781,600 in addition to the $24,173,200 Iran already had paid. He reported that, as a gift, the United States would add ten diesel genera- tors essential to operating the HAWK system, and had offered to provide test and calibration equipment and technicians to operate it. At his morning national security briefing the same day, the President discussed both [our] ability to rescue hostages and next steps with Iran. The President is said to have decided that there would be no meetings with Iranian offi- cials until the hostages were released. (McDan- iel log) The next day, Ghorbanifar and the Ira- nian official argued pricing, using an oil trans- action as cover. "[P]er instructions" from the official in the Prime Minister's office, who had unsuccessfully tried to reach him, Cave called the Iranian June 2. Although there was a lot of talk one thing emerged and that is that the B's people want to somehow go through with the deal. The difficulties that dealing with us was causing them [sic]. The B empha- sized that there are many people that oppose dealing with us. When O'neil asked if this was causing his group political diffi- culties, he confirmed that this was the case. His problem is that they must appear to have made a good deal. He pointed out that the previous release of the one person in return for the 1,000 had not left them in good oder [sic] as the 1,000 were not that important, and they had to return the other materials. 3. O'neil stated that we were very much in- terested in the deal and a long term rela- tionship between the two companies, but the chief of our company was insisting on the release of our embargoed 4,000,000 dollars [coverterm for hostages] before we delivered the remainder of 240 [HAWKs] spares and then the two large boxes [radars]. What was interesting at this point is that the B did not say there could be no Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 deal on this basis. He said that some fro- mula [sic] must be worked out whereby we can deliver what we promised at much the same time as they deliver the 4,000,000. For the first time he said that they needed political currency to deliver on their end. He stated that they have a serious problem with the 4 million in explaining why it is that they need it. This has been a serious problem in their negotiations with those that control the 4 million. When O'neil asked the direct question can they gain control of the 4 million, the B hesitated but said that this was within their capabili- ties. He said that if we had stayed in Dubai [Tehran] a few days longer they could have delivered 2 million immediately. He em- phasized in answer to an O'neil question that they could not specifically say exactly when the 4 million would be transfered, but this was still in their power, despite the fact that the situation where the 4 million are held was continually deteriorating. The B urged that we try to do this deal as soon as possible, so that our two companies could have a meaningful future relation- ship. O'neil said that he would call back at approximately the same time on 23 June. 4. The B continually spoke of the serious problems that trying to consumate [sic] this deal was causing him and his col- leagues. He urged O'neil to contact the merchant [Ghorbanifar] to get all the de- tails. He would try to contact the merchant immediately to provide as much back- ground as possible. The B on several occa- sions said that there was [sic] considerable forces arrayed against this deal and he con- sidered himself in some danger. Most in- teresting note is that during this conversa- tion the B insisted that they want to go through with deal. Although he bordered on the inarticulate at times, long pauses and some relapses into his old song and dance, he did not reject our position out- right. O'neil's reccomendation [sic] is that we sit down and talk it out with him in in [sic] person, we may get more out of this than the transaction we are interested in. Two days later, North reported to Poindexter that the Iranian official was trying to reach Cave again. As of this minute they have not yet con- nected. We are trying to have him call back. Nir advises that [the Iranian official] called Gorba about an hour ago in a state of great agitation to say that he was trying to get Sam [O'neil] to arrange for the re- lease of one U.S. hostage. Nir believes it to be sincere and that we may really be close. I am not so sure but [C/NE] Sam and Charlie [Allen] all think it may be real. We'll see. Sam will call me later tonight and I'll come back into here or CIA to re- ceive the report. Wd be nice to have some kind of secure voice to save these middle of the night trips. Will advise in a.m. of any developments. (North PROF note to Poindexter, 6/24/86, 21:28:15) At about the same time, a successful rescue began to look possible. North wrote in late June: You should also be aware that CIA be- lieves that they have made a major break- through on the location of at least two of the hostages. The info is being carefully analized [sic] before passing to JSOC, but there hasn't been this much enthusiasm on the issue in a long time. Our other effort seems to be at a standstill w/ Ashgari [sic] [Ghorbanifar] and [his Tehran contact] screaming at each other about prices and Geo. Cave telling [the Iranian official] that we are fed up w/ the whole thing and are tired of being insulted by people who "pretend to be able to do things they cannot." (North PROF note to [?Poindexter], reply to note of 6/25/86) Ghorbanifar told the Board that Cave's tele- phone calls "every night" created a problem in Tehran. He recalled Cave. saying the President said this, McFarlane said this, Poindexter said this, and making a lot of confuse [sic] for Iranians. Because he doesn't know there are three groups that must come together to make a deci- sion. General Scowcroft: Who was Cave talking to when he called? Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Mr. Ghorbanifar: To the man who is the head of this operation, the special aide to the Prime Minister, the number one in his office. (Ghorbanifar 175) The official in the Prime Minister's office and Ghorbanifar held a number of discussions at this time. The Iranian official complained that the United States charged six times the 1985 price for the weapons at issue. Ghorbanifar tried to explain the pricing, while complaining that his financial problems had forced him into hiding. He needed $5 million to avoid ruin. On June 30, Ghorbanifar told his Tehran contact that the Americans again explained the high prices, and had suggested that, once the matter was resolved and relations were improved, the United States would assist Iran to obtain loans from international banks and American agen- cies. Ghorbanifar then proposed, without indi- cating who may have originated the idea, that Iran obtain the release of one hostage to coin- cide with the July 4 celebrations and the cen- tennial of the Statue of Liberty. He added that, within twenty-four hours of such release, the United States would ship the rest of the HAWK spare parts. The radars would follow, and Iran would effect the release of the last two hos- tages. The Iranian official doubted a hostage could be released by July 4; for one thing, there had to be agreement on the price of the materiel. Ghorbanifar agreed they had to solve the price problem before the timing of the hos- tage releases could be fixed. Cave also spoke to the official in the Prime Minister's office about the price of HAWK spare parts on June 30. Cave reported that: 1. This was fairly lengthy call during which B [the official in the Iranian Prime Minis- ter's office] continued to harp on the Price [sic] of the 240 items. Sam [O'neil] told him that we had sent a copy of the prices to the mercahnt [sic] [Ghorbanifar]. These constituted the prices that the middlemen paid for the goods. B wanted to -know [sic] if Sam had a copy so he could relate some of them to B. Sam said that he did not have a copy of the prices. During the course of the conversation, B would inisist [sic] on discussing kpricing [sic]. He re- fused to be stonewalled and said that he was under enormous pressure to get some adjustment in the pricing. When Sam asked about the Micro [sic] fiche list. He confessed that he had not sent it but would on the morrow. Th;is [sic] is some kind of indicator that such a list might not exisit [sic]. However, he does have something and suspect it might be an old invoice. He said that his superiors are shocked that the USG would selll [sic] them parts at black market prices. Sam -pointed [sic] out that he was buying from the merchant. B was insistant that some th;ing [sic] must be done on pricing as they were not prepared to pay six times -pricing [sic]. 2. Sam told him that something must break soon as the Chief of our comp[any] is fed up with the whole deal. He was must [sic] disturbed at the way our delegation was handled in Dubai [Tehran] and is on the verge of corking off the while [sic] deal. This did not seem to make a great impres- sion on B. Sam also said that he and Goode [North] are in deep trouble for having recomended [sic] the deal in the first place. B said that we were in no more trouble than he was on his end. Sam said that we were then all in the same trench together. 3. At one point in the pricing argument, Sam pointed out that we do not cheat on prices, were they displeased with the [?HAWKs]? when [sic] B kept insisting on some kind of break in the price, Sam told him that as far as we were concerned they could buy the parts elsewhere. This deal was set and it would have to go -through [sic] the mercahant [sic]. 4. Toward the end of the conversation, B made a plea to Sam to do something about the end of the price if at all possible. He also extracted a promise from Sam to call him back tomorrow. According to the CIA/IG report, Cave ob- tained the following letter, purportedly written by Ghorbanifar to his Iranian contact, on 8 July 1986.73 73 Except as indicated, the material between square brackets is in the document as annotated by the CIA. The Board cannot verify the authenticity of the letter. According to the CIA Inspec- tor General, Cave obtained this letter in late July 1986. (CIA/IG Chronology 27) Clair George told the Board that, while Cave B-131 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 My dear and esteemed brother [B]: After greetings, I feel it is necessary to state the following points with respect to the American issue, which for a year has taken up everyone's time and has become very unpleasant: If you remember, we had some very lengthy telephone conversations Monday and Tuesday [30 June and 1 July]. I stressed the fact that the essence. of a [good] policy is to identify the moment, exploit the occasion, and recognize the proper and appropriate time in order to take advantage of them and to get conces- sions. I said that Friday was the 4th of July and the celebration of the 210th anniversa- ry of the American Independence as well as the 100th anniversary celebration of the Statue of Liberty in New York. For this reason, there was going to bea very elabo- rate and majestic celebration titled `Liberty Day' in New York at the foot of the Statue of Liberty. The Americans were calling it the Celebration of the Century; and the US President and the President of France will be hosting the celebration; for it is the day of liberty and celebration of freedom. [I said] that if we could mediate for the re- lease of the American hostage clergyman on Thursday, 3 July, and he could attend these celebrations-as he is clergy-we could exploit it and benefit from it a great deal; we could get the Americans to accept many of our demands. Naturally, as usual, nobody paid any attention to my sugges- tions. The. Americans were expecting us to take at least these steps for them: Anyway, the Americans are saying that last year after the Iranians mediated the release of an American clergy, M. Mier [sic] who was kept hostage in Beirut, they [the Ameri- cans]-as a goodwill gesture and as a first step-made available to Iranians 504 [sic] TOW missiles. Also, during the year since then, they [the Americans] have taken the following positive and constructive steps as a sign of goodwill and utmost respect toward the Islamic Republic: However, in return, the Iranians have not made the began his involvment as an interpreter, he "became a player.... I'm afraid he got way out there somewhere and we didn't have a string on him every step of the way." (George 49-50) slightest attempt nor shown the smallest sign-even discreetly-to improve rela- tions: 1. After the clergyman's release; whenever and wherever American officials talked about countries supporting and nurturing terrorism, they did not include Iran; also, the Chief Justice of the Supreme Court [translator believes he means Attorney General of the United States] in an official interview, mentioned Libya, Syria, South Yemen, and Cuba as the countries support- ing, protecting, and strengthening terror- ism. 2. With regard to the Iran-Iraq war, the US Department of State, in an official note, strongly condemned the use of chemical weapons. 3. The American Ambassador at the United Nations was the first person to vote for official condemnation of Iraq for the use of chemical weapons. 4. [Issuance] of an official announcement terming the Mojahedin-e Khalq Organiza- tion terrorist and Marxist; the [issuance] of a circular to the Congress and to all Amer- ican firms and institutions, and banning of any and all types of assistance to the oppo- nents of the regime of the Islamic Republic of Iran. 5. Opposition to the decrease in oil prices; so much so that Mr. George Bush, the Vice President, on two occasions during speech- es and interviews announced that the re- duction in oil prices would ultimately be harmful for the United States and that oil prices should increase. 6. Dispatch of two US planes with more than 1,000 TOW missiles on two separate occasions, at cost price. 7. Dispatch of a high-ranking 5-man team from the White House and the Defense Department for a meeting with B and his accompanying team, and the provision of certain preliminary military data on Iraq with an agreement that more complete and comprehensive data should be made avail- able in subsequent. meetings and after the final agreement. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 8. Arrival of a very high-ranking delegation from the White House headed by Robert McFarlane, Mr. Reagan's special assistant and advisor, together with five high-rank- ing civilian and military officials for a 4-day stay in Tehran; they brought more than one-fifth of the requested spare parts for missile systems; further, some complete military, technical, and intelligence infor- mation and data with regard to Soviet threats against Iran, and the military and political -- [sic] 74 of that government [USSR] with full details on [plan for] inva- sion of Iran; Soviet activities in Kurdestan, Baluchestan, and Iraq; [Soviet] cooperation with opponents of the Islamic regime; and above all, a clear and explicit announce- ment by the US Government that it consid- ers the regime of the Islamic Republic stable and it respects that regime. Also, that the USG does not in any way oppose that regime; and promises that it has no in- tentions or plans to bring it under its [sphere of] influence, create changes, or interfere in its internal affairs. Later, Min- utes [sic] of the meeting and agreement were submitted, reflecting the goodwill and total cooperation of the United States with the Islamic Republic; specifically with respect to the war and other problems threatening this regime. [You may read these Minutes again.] The Americans are saying: "We were treat- ed in an insulting and unfriendly fashion; they made us return empty-handed while we were ambassadors of friendship and as- sistance." The gentlemen themselves know the de- tails of the events better than anyone else. As you know, the US officials in Tehran re- iterated over and over that in exchange for what they proposed, they only expected that our [Iranian] authorities should medi- ate and use their religious and spiritual in- fluence for the release of the four Ameri- can hostages who have been kept in Beirut for more than two years; that by this hu- manitarian deed, they could bring happi- ness to the families and children waiting to see their fathers; and that they could fur- ther be free in every respect to provide us [Iranians] with secret and necessary sup- port. They made it very clear that they are fully prepared and willing to provide [Iran] with all types of political, economic, and weap- ons cooperation and accord, on the condi- tion that such assistance should not be considered part of [a bargain for the re- lease of] hostages; but rather it should be considered a goodwill and better relations and friendship gesture by the United States. Prior to the arrival of the US team and myself in Tehran on 25 May 1986, there was full agreement that upon arrival of the high-ranking US delegation in Tehran, bringing some of the requested items, the Iranian authorities would begin immediate- ly mediating for the release of all American hostages in Beirut all, together and collec- tively. And that after this, the remaining items requested by Iran would arrive in Tehran. The US team would stay in Tehran until the rest of equipment [items]-among them the large HP radars-also arrived in Tehran. Further, there was supposed to be official agree- ment and commitment for providing the rest of Iran's weapon needs, as well as secret agreements in some political and economic areas. The Americans were to leave Iran only after all of these stages had been completed. However, although the 10-man US team and their giant special aircraft was in Tehran for four days, unfortunately noth- ing was accomplished. You well remember that on the last day of the stay, His Excel- lency [redacted] 75 in the presence of you and another gentleman, insisted several times that everyone should agree for the time being about the mediation for the re- lease of two hostages. But Mr. McFarlane did not accept this and stated that they were there [in Tehran] and were prepared to discuss and solve some basic and strate- gically important issues and to stand by you [Iranians]; all of these must be solved Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 together, so that no problem remained and the way could thus be paved for everything once and for all. I must [at this point] remind you that in .1985 there were 45,703 deaths on US highways, and that during the same year, 1,301 Americans died as a result of chok- ing on their food [gluttons]. Thus, we must not put the Americans under such pressure that they end up including these four [hostages] as part of the above statis- tics, and we end up losing this historic op- portunity which has combined one whole year of hardship and difficulties with some heavy expenses for me. You know that this matter has been tan- gled for 45 days. I can assure you that the Americans neither can nor will be able to take another step along this path unless we should at least carry out as a preliminary and beginning step that which was [redact- ed] 76 was insisting upon. I also believe that whatever we want to do and whatever decision you make, must be carried out within the next 2-3 days. Now, there are only three solutions; I have totally convinced them [Americans] and they are in total agreement with all of the three solutions. I believe and strongly rec- ommend that the first solution be chosen: 1. You should immediately pay in cash the amount for the items that have already ar- rived, including the remaining 177 items. The money for the 240 items, as well as the money for the two HP's, should be paid through the London branch of Bank Melli Iran on 30 July, that is, in 21 days. 2. That same evening, you should mediate and release two of the hostages. 3. Within a maximum of 24 hours after this, the Americans would deliver all of the 240 items, that is approximately 4,000 spare parts and two giant HP's at Bandar Abbas. 4. Immediately after receiving all of the above items and their full inspection, you should take immediate steps for the release of the remaining two hostages. Also, for humanitarian and religious reasons, you should mediate for identification of the burial place of the hostage who died last year [W. Buckley] so that his body can be transferred to the United States to be buried next to his mother as was his wish. 5. Seventy-two hours after the delivery and receipt of all the 240 items of [HAWKs] and the two HP's and the release of all hostages, a high-ranking US team will be present in Geneva, Frankfurt, or Tehran- as you wish-and will take careful steps with respect to providing the proposed Minutes of the meeting and will make a commitment. Further, the team will study the matter of the remaining HP's and heli- copter spare parts and all other needs and requirements of the Iranian army. In this regard, agreement as to the date for their delivery could be specified. Meanwhile, they [Americans] are ready to send imme- diately technical experts and equipment for testing and repairing them. Second solution, which would require more time and would entail more head- aches: 1. You should pay in cash the amount for the items that have already arrived, includ- ing the remaining 177 items. The money for the 240 items should be paid through issuance of a check via London branch of Bank Melli Iran on 20 July, that' is in 11 days. 2. That same evening, you should mediate and release one of the hostages. 3. Within 12 hours after this, they will de- liver all of the 240 items in Tehran. 4. Immediately after receiving fully and ac- curately all of the 240 items in Tehran, you must mediate and release the same day two more hostages and must pay the money for the two HP's. 5. Within a maximum of 24 hours after the release of these two hostages and the pay- ment of the amount for the HP's, the radar equipment will be delivered at Bandar Abbas. 6. After the complete and correct delivery of the two HP's, you will mediate and take steps for the release of the last [fourth] Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 hostage as well as the body of William Buckley. 7. Seventy-two hours after receiving all of the 240 items of [HAWKs] and the two HP's and the release of American hostages, a high-ranking US team will be present in Geneva, Frankfurt, or Tehran-as you wish-and will take careful steps with re- spect to providing the proposed minutes of the meeting and will make a commitment. Further, it will study the matter of the re- maining HP's and helicopter spare parts and all other needs and requirements of the Iranian army. And in this regard, agreement can be made as to the specific date for their delivery. Meanwhile, they [Americans] are ready to immediately send technical experts and equipment for test- ing and repairing them. 8. I personally and on my honor-whatever way you deem it proper-would guarantee and make commitment that immediately after carrying out the last phase-that is, after the delivery of the 240 items and the two HP's and after the release of all Amer- ican hostages, within a maximum of one month-I shall deliver in Tehran 3,000 TOW missiles at a cost of $38.5 million which is the cost to the Americans them- selves, plus 200 Sidewinder missiles mounted on F-4 and F-5 planes, again at cost. Naturally, [only] if you make the money available to me-not like this [last] time when you did not leave anything for me. Third solution: Since I have tried to be a mediator for good, I do not wish to be a cause of mis- deeds. I have tried to bring [the two sides] together and create friendship, and not to cause further division, hostility, and alien- ation. Thus, if you do not find either of the above-mentioned solutions advisable, return immediately the exact items that they brought so that the whole case can be closed and we can pretend nothing hap- pened, as if 'no camel arrived and no camel left' [old Persian saying]. Everyone can thus go his own way. Hopefully, in the future, [when] conditions and circum- stances are once again suitable, steps can be taken. I mean we should not 'put a bone inside a wound' [another old Persian saying, meaning not to make things worse]. There is no reason for it. If I have encoun- tered great difficulties and many material, spiritual, and prestige problems soley due to friendship, good intentions, honesty, belief, and trust, it was simply for the love of [my] country and my friendship with you and it does not matter. I hope good and generous God will compensate me for it, as my intentions were all good. I beg you to take a speedy and decisive step and make a quick decision on this issue, for the good and the welfare of the Islamic Republic. Thanking you and with highest respect, Manuchehr Qorbanifar signed 9 July 1986 "In June and July," Charles Allen told the Board, there seemed to be sort of a stalemate. In early July, Colonel North called me out of a meeting-I was lecturing to a group at the Office of Personnel Management-and stated that he had been assured by Amiram Nir, special assistant to the Prime Minister, Peres at that time, of Israel that another American would be released very shortly. He at that stage briefed some of the senior people in the government. We sent a hostage briefing team to Wies- baden and no release occurred, and we brought the team back." Colonel North was deeply disappointed and he said that he had been admonished by Admiral Poin- dexter on this, and he cut off all contacct with Amiram Nir at that stage and asked that I talk to Amiram Nir for a period of two or three weeks.78 77 On July 2, Ghorbanifar told his contact in the Prime Minis- ter's office that the United States thought Iran used the pricing problem as an excuse to cover Iran's inability to obtain the re- lease of another hostage. He said that United States suggested that, if another hostage were released, then the United States im- mediately would ship the remaining HAWK spare parts. 78 According to the CIA Inspector General: "[July 7-261: Allen remains in almost daily contact with Nir by telephone. (According to Allen, Nir is clearly alarmed at losing direct contact with North and appears to be working feverishly with Ghorbanifar and others to free an American hostage.) Nir tells Allen that, according to Ghorbanifar, I/1 is making an B-135 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 (C. Allen 21) The Secretary of State told the Board that, on July 2, Mr. Armacost wrote me a memo, inform- ing me "that there is renewed `conjecture' that the NSC-sponsored search for a U.S.- Iran deal for hostages will produce an early result. The story is that one hostage may be released tomorrow in Lebanon." Arms were not mentioned. I do not recall having seen this memo, but this reported "conjecture"would have added nothing to my knowledge of the matter. You heard this from time to time. (Shultz, SRB, 56) In the middle of July, two senior foreign gov- ernment officials visited Tehran. One of them reported a feeler by Rafsanjani to the effect that the Americans knew what had to be done to improve relations. North wrote Poindexter on July 10 that: [y]ou will recall that several months ago the [name deleted] initiated direct discus- sions with the Iranians on the matter of our hostages. This is the third such over- ture they have made on our behalf. In ad- dition to the information in the cable, . . . [of the [country deleted] Embassy in Wash- ington] made the following comments: -The perception of a Soviet threat to Iran is a concern that has reached the highest levels of the Revolutionary Government. -There are obviously members of the Iranian Government who foresee the possibility that "given the right condi- tions" Iran could "cause the release" of the American hostages. -Although none of the Iranian offi- cials responded positively to [Director General of the [country deleted] For- eign Ministry's] suggestion that direct secret discussions be initiated between the U.S. and Iran, it was not rejected. Rafsanjani noted that "the U.S. Gov- ernment knows what it should do." -The [country deleted] have clearly explained to the Iranians that they are reporting directly back to the Ameri- can Government on these contacts. From this and earlier meetings, it is appar- ent that the [country deleted] have been able to establish and maintain a direct link at the highest levels of the Iranian Govern- ment. Given the stalemate on other initia- tives and our inability too ensure that we are in direct contact with responsible Irani- an officials we may be able to use this most recent [country deleted] visit to Tehran as an opportunity to establish such a contact. [Name deleted] , who has acted as our con- duit for these matters, has suggested that they have the ability to pass a secure com- munication directly to Rafsanjani through their ambassador in Tehran. It is important to note that, during the meeting, [name deleted] pointedly asked whether we had conveyed our willingness to eventually normalize U.S.-Iranian rela- tions when our "officials were in Tehran." A direct response was avoided and [name deleted] was advised that our willingness to talk with the Iranians is "common knowledge." It is disturbing that the visit may also be common knowledge.79 North proposed sending the following mes- sage: We have reported the results of the June 27-29 discussions to the American Govern- ment and they have asked us to relay the following message in highest confidence. The highest levels of the American Gov- ernment are prepared to open direct and private discussions with responsible offi- cials who are empowered to speak on behalf of the Iranian Government. They have asked us to tell you that under the right conditions, the American Govern- ment is prepared to take steps leading to a effort to secure the release of a hostage. He asks Allen to re- frain from informing North since he does not want to raise North's "hopes too high." When Father Jenco is released, North again resumes direct contact with Nir." (CIA/IG Chronology 27) 7B On June 29, 1986, a column by Jack Anderson and Dale Van Atta in the Washington Post stated: "We can reveal that the secret negotiations over arms supply and release of American hostages have involved members of the National Security Council and a former official of the CIA." Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 __ Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 normalization of relations between your Government and theirs. If you are agree- able, a senior American official is prepared to meet with responsible representatives of your government at the time and place of your choosing. They are prepared, as you have suggested, to make an appropriate gesture of goodwill. (North to Poindexter, 7/10/86, "Non-Log") In his memorandum to Poindexter, dated July 17, North indicated that Poindexter approved sending this message. On July 17, North reported a second oppor- tunity for direct contact with the Iranian gov- ernment to Poindexter. The Secretary of State had been given a memorandum by a foreign of- ficial on "US-Iran Relations," reporting a recent conversation in Tehran. At the conclusion of my discussions in Tehran, Dr. Larijani, Irani Deputy Foreign Minister stated that he wanted to raise a matter that was highly sensitive. He re- quested that it should be treated with ap- propriate confidentiality and that I should convey it in [country deleted] at a 'suitable' level. Larijani added that he left it to [country deleted] to decide the level at which to raise the issue with the Ameri- cans. 2. Larijani said that since the beginning of the Irani revolution, the United States of America had adopted an implacably hostile policy towards Iran. Apart from attempts at physical intimidation, the Americans had tried to undermine the Irani revolution through various means and especially by giving moral and material support to Iran's enemies. Larijani said that the Americans should appreciate that the Irani govern- ment and people could not compromise on the Irani revolution which had been brought about through supreme sacrifices by the Irani people. They would defend the revolution to the last drop of blood. 3. The American government should ap- preciate, however, that Iran and America shared similar strategic interests in the region. The danger of pro-Soviet, Marxist interests asserting themselves in the region was growing rapidly. After Afghanistan, the Marxists had taken over in South Yemen. Pro-Soviet, Marxist elements were strongly entrenched in other countries in the region and especially in Egypt, North Yemen, Kuwait and Iraq. Even in the Gulf coun- tries there was disillusionment with the es- tablished order which could be overthrown by forces that would adopt an anti-US and pro-Soviet policy. Iran viewed these devel- opments with concern. Iran felt that, de- spite its physical resources, the United States would not be able to influence de- velopments especially, at a time of internal convulsions. Iran, on the other hand, had a greater capacity to influence and pre-empt such developments. 4. Larijani's remarks indicated that, despite Iran's rhetorical invective against USA, Iran wanted an easing of relations on sub- stantive matters with USA and that Iran wanted [country deleted] to play the role of intermediary in attempting a better un- derstanding with the American govern- ment. (Tab II to North to Poindexter, 7/17/86) In his covering memorandum, which was la- beled "Non-Log," North wrote: When we first commenced direct discus- sions with the Iranians, we established an immediate objective of recovering our hos- tages and longer-term goals of ending the Iran-Iraq war and normalizing the U.S.-Ira- nian relationship. . . . To date, we have been unable to establish a direct contact with Iranian officials who are willing/able to take such steps. It is entirely likely that the visit of [the for- eign minister of a friendly nation] presents an opportunity to have him contact appro- priate Iranian officials with a message from the USG. The memorandum provided to Secretary Shultz by Larijani . . . indicates that various officials in Iran do indeed wish to establish such contact. When we first discussed this matter, it was indicated that the point of contact for [a foreign official] to deliver our message would likely be Musavi-Khamenei, the Ira- nian Prime Minister. Given Musavi's radical past, it is unlikely that he would be as posi- tively disposed as Rafsanjani, who is more Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 widely known as a "pragmatist." In a meet- ing this afternoon with George Cave, he volunteered that it was "too bad we did not have enough trust [in this country] to carry a message to Rafsanjani, since they are apparently close." Cave is unaware of this initiative. In order to insure consistency. with the ear- lier message delivered by [an official of a second friendly country] and messages we hope to have delivered by other trusted interlocutors, a verbatim message rather than talking points has been pre- pared. . . . At this point, two actions need to be taken: -Secretary Shultz should review the proposed message at Tab III and, if he concurs, it should be passed to [the foreign minister of the first friendly nation] for personal delivery to the Iranians. -We should seek to have the message delivered by [him] to Rafsanjani rather than Musavi. (North to Poindexter, 7/17/86) C. Jenco Whether or not Poindexter acted on North's proposals to try to use these two nations' access to the Iranian government, on July 21, the United States obtained a clear indication that a hostage might be freed soon. North re- ported that: We have just been told by Nir that "the Iranians claim to have taken action this morning to release one hostage.". . . I have asked CIA to alert [appropriate per- sonnel in] Beirut and no others to the pos- sibility in order to preclude a repeat of Jul[y] 4. We have not put any other USG assets on alert. RELATED SUBJECT: Absent further developments on this ap- proach, George Cave will ? proceed to Frankfurt to meet w/ Tabatabai,80 the cousin of the man I met w/ here. T is al- ledgedly well connected to Rafsanjani and several other of the so called "pragma- 80. According to North's desk calendar, North met "Tabata- baie," possibly with Senator Helms, on June 27. tists." Purpose of the meeting is to deter- mine T's real.access and willingness to act as an interlocutor. If bona fides prove out he could also be used to pass the same message we sent back via [a third country]. In that regard, who was [that country's em- issary] to give our message to on the Irani- an side? (North PROF note to Poindexter,. 7/21/86, 18:04:38) Poindexter informed North the same day that [the emissary] was to pass the message to "the Iranian FM [Foreign Minister]. Don't tell anybody including Cave about this." (Poin- dexter PROF note to North, 7/21/86, 20:10:14) North in turn replied: Roger, WILCO. Am concerned, however that if tonight's [information] does indeed bear the fruit promised, that we may be confusing an already difficult situation. Maybe that's not as bad as it might other- wise be since those guys will all get the message eventually if anything develops. (North PROF note to Poindexter, 7/21/86, 20:20:23) On July 25, Poindexter wrote North: Bob Oakley must have told Shultz about a discussion that took place in OSG. Shultz called me about a Cave meeting in the next few days. I vaguely remember that you told me something about this. George just wanted to be sure that we did not have any disconnect between what [the emis- sary] will be telling them and what Cave tells them. (Poindexter PROF note to North, 7/25/86, 11:33:17) In his reply, North reminded Poin- dexter where the various communications stood. Cave is meeting w/ [a relation of a power- ful Iranian official] and Tabatabai to deter- mine level of access and current political sentiments toward the present regieme [sic]. He was prepared to pass a message identical to the one we sent thru [a friendly foreign official] but I held it back when you advised that the FoMin, not Rafsanjani was to be the recipient. We have likewise sent no message back thru [the. other the friendly government]. At the present, the Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 only active courier is [the emissary of the first country] and the only recipient is the FM. Cave will report his findings when he returns from Frankfurt and we can. then determine whether we wish to use any of these new contacts as interlocutors. Also related: Nir and [the official in the Iranian PM's office] are both out of their respec- tive pockets. Charlie agrees that it is en- tirely possible that they are meeting in Europe. (North PROF note to Poindexter, 7/25/86, 18:43:42) On July 26, Father Lawrence Jenco was re- leased. McFarlane wrote Poindexter: "Bravo Zulu on Jenco's release. Do you correlate this to the anxious calls that have come since the trip to Iran and our insistence that they move first? Or is it really a Syrian effort?" (McFar- lane PROF note to Poindexter, 7/26/86) 81 Poindexter explained how it had come about in his reply: Thank you. It is directly related to your trip out there. The Syrians only entered at the last minute. Gorba finally convinced [his Tehran contact] after numerous tele- phone calls that they should come forward with a humanitarian gesture. Gorba either on his own or as Nir's agent is out a lot of money that he put up front for the parts. [the Tehran contact] has been unwilling to pay him since all of the material has not been delivered. Gorga [sic] has cooked up a story that if Iran could make a humani- tarian gesture then the US would deliver the rest of the parts and then Iran would release the rest of the hostages. Of course we have not agreed to any such plan. Nir and Gorba are in London. [The Iranian of- ficial] is enroute [sic]. I am trying to decide whether to send Ollie and George Cave. The problem is that if parts aren't deliv- ered, Gorba will convince [his Tehran con- tact] that we welched on the deal. Al- though through several conversations Cave has repeated to [the Tehran contact] what our position has been-all of the hostages 81 North apparently received a copy of this message. He wrote McFarlane: "[t]he bottom line is that this is the direct result of your mission and neither the Syrians nor a non-existent Casey trip had -anything to do with it." (North PROF note. to McFar- lane, 7/29/86, 20:36:04 (reply to note of.7/26/86, 13:51)) out before anything else moves[,] I have aboutdecided [sic] to send. Ollie to make certain our position is clear. It seems to me that we may have some leverage over. [the official in the PM's office] now since he is out on a limb in Tehran and may fear for his own safety. (Poindexter PROF note to McFarlane, 7/26/86, 14:58:07) McFarlane agreed with Poindexter's ap- proach. I agree with your strategy; to send Ollie and to reaffirm our position. Of course the unknowables are: 1. Do they-as they have said-no longer have control over the others (Itend [sic] to believe they do still have control over all; Jenco ought to be able to throw some light on that). 2. Will [the Iranian official] have the courage and influence in Tehran to be able to recom- mend the release of allwithout [sic] some- thing coming from us. I tend to doubt it. He is a simple [person] way over his head and afraid of his own shadow; not the kind to take risks or to trust foreigners he cannot begin to understand. But it is likely that the higher ups-[a senior foreign.. policy advisor] (the most senior guy we met) will understand and respect that we are sticking to our original position. Over time, constancy is respected. 3. Finally however, there is the risk that even the higher ups will see no great downside, in killing one of the remaining hostages. I'm afraid that's just a risk we will have to run for to do otherwise will lead to a thousand reoccurences [sic] of this scenario in the months ahead as they see that we really can be strung out. (McFarlane PROF note to Poindexter, 7/26/86, 21:53:58) On July 26, the day of Jenco's release, Poin- dexter "[b]riefed [the] President on secure phone," (Poindexter, handwritten note on North to Poindexter 7/26/86), from a paper by North on "what we know of the Jenco release," for Poindexter to give the President. (North to Poindexter 7/26/86) The release of Father. Lawrence Jenco is a second positive step in our protracted and Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 difficult dialogue with the Iranians. Father Jenco's release undoubtedly comes about as a result of Bud McFarlane's trip at the end of May and the continuing direct and indirect contacts we have had with Iranian officials. Our Israeli contacts and the Irani- an intermediary in Europe advise that the Iranian Government now expects some re- ciprocal move on our part-though exactly what, we are uncertain. [Available information] indicate[s] that the decision to release Father Jenco was made in Tehran on or about July 21. On Wednesday, July 23, our Israeli point of contact advised us that "if, as we hope, a hostage is released, it will be Jenco." It was also on this date that the Israeli point of contact (Amiram Nir) told the Iranian in- termediary in Europe that the USG was breaking off all contact on this matter. We have also learned that July 24 was a key date in the most recent release: -The Iranian Government paid their European intermediary $4M on Thurs- day, July 24, as partial payment for HAWK missile parts which were re- moved from our mission aircraft at the end of May. (It is important to note that in order to pay the Israelis for the HAWK missile parts, the Iranian inter- mediary in Europe borrowed more than $15M and has been under threat of death from his creditors. The Israe- lis regard this payment as further proof that the Iranians wish to contin- ue the contact with the U.S. on the hostage issue.) -Father Jenco has told Ambassador Eagleton . . . in Damascus that it was on Thursday, July 24, that he was sep- arated from the other American hos- tages in Beirut and delivered to a loca- tion in the Bekka Valley. It was from this location in western Lebanon that he was subsequently released to Leba- nese authorities, who in turn delivered him to a Syrian military checkpoint. Our next step will be to have two USG representatives meet with the Israeli and Iranians in Europe, if possible, tomorrow in an effort to determine Iranian expecta- tions. This is not a negotiating session, but rather an attempt to maintain contact and, if possible, assess how we should now pro- ceed. To our knowledge, no new Israeli deliveries have occurred and all remaining HAWK missile repair parts are still in a covert depot in Israel. (Tab I to North to Poindexter, 7/26/86) With this memorandum, North attached a memorandum from the Director of Central In- telligence on the "American Hostages." 82 After discussing the release of Father Law- rence Jenco with Charlie Allen and Dewey Clarridge, I believe it is important that you have our assessment of this development and prospects for release of additional hos- tages. First, it is indisputable that the Iranian connection actually worked this time, after a series of failures. You will recall that the [Iranian official]-Ghorbanifar connection also resulted in the release of Reverend Weir in September 1985. Syria played no role either in the release of Weir or Jenco. After the impasse in Tehran over in late May, [the Iranian official] continued to ini- tiate direct contact with one of my officers, George Cave, even though the Iranians had been told that we were no longer in- terested in pursuing the matter. The fact that [this official] persisted in contacting us indicates his desire to arrange a "deal" with Washington either through Ghorbani- far or, if necessary, with Cave. He also clearly wanted to keep a channel open. Amiram Nir, Special Assistant to the Prime Minister of Israel on Counter-Terrorism, has also played a critical role in a deter- mined effort to force Iran to begin the re- lease of American hostages. He has been supported by Prime Minister Peres and De- fense Minister Rabin in this endeavor. In order to make the terms of the arrange- ments more palatable, Israel, on its own, offered additional arms "to sweeten the deal.". . . [We received information on 21 July that the Iranian official] had taken action with 82 According to the CIA Inspector General, Charles Allen pre- pared this memorandum. (CIA/IG Chronology 28) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 other Iranian authorities to release one hostage. To reinforce this commitment, he transferred $4M to a West European bank to pay his European intermediary for the HAWK spare parts removed from our mis- sion aircraft in May. On Wednesday, July 23, when no hostage had been released. Ghorbanifar was instructed to inform [the Iranian official] that "the deal was off." On Thursday, July 24, the Israelis [obtained information] indicating Jenco would be re- leased. In return for the release, [the Iranian offi- cial] probably expects to receive most of the HAWK spare parts not yet delivered, along with additional military equipment that Israel unilaterally has added to the ar- rangement. Once this equipment is deliv- ered, [the Iranian official] stated that Iran would take action to obtain the release of one more hostage and would pay.the re- mainder of the money owed to the Iranian intermediary for the HAWK spare parts. According to [our information, the Iranian official] apparently expects to then receive the two HAWK radars and the remainder of the HAWK spare parts, although it is unclear as to the timing of these additional deliveries. [The Iranian official], moreover, indicated a willingness to meet with U.S. officials again on these matters, either in Tehran or "somewhere else" - presum- ably Western Europe. This is how we see the current situation: -The Ghorbanifar-[Iranian official] connection has worked for the second time - and another American has been released. -Ghorbanifar is an uncontrollable factor, but appears to respond gener- ally to Nir's direction. -Nir has every reason to work for fur- ther releases of our hostages. Peres and Rabin have put their reputation on the Ghorbanifar-[Iranian official] connection and support Nir fully in his endeavors. There would be a consider- able loss of face for Nir and his superi- ors if the link were broken. This con- nection appears to be the only hope they have for recovering their own missing soldiers. -[The Iranian official] has now acted and likely expects the United States to respond quickly in turn by delivering most of the remaining HAWK spare parts. He probably believes the United States is also supplying the additional military equipment that has been promised. -If the deliveries do not occur, [the Iranian official] will lose badly with his superiors in Tehran and matters could turn ugly, especially since the Leba- nese Hizballah captors probably are, not pleased with the Jenco release. -If there is not USG contact as a result of Jenco's release, it is entirely possible that Iran and/or Hizballah could resort to the murder of one or more of the remaining hostages. In summary, based on the intelligence at my disposal, I believe that we should con- tinue to maintain the Ghorbanifar-[Iranian official] contact and consider what we may be prepared to do to meet [the Iranian of- ficial's] minimum requirements that would lead to release of the rest of the hostages. Although I am not pleased by segmented releases of the American hostages, I am convinced that this may be the only way to proceed, given the delicate factional bal- ance in Iran. I also see resolution of the hostage issue as potentially leading to con- tacts with moderate factions in Iran that we may be able to deal with in the longer term. (Casey to Poindexter, 7/26/86) 83 On July 26, North wrote to Poindexter that Cave is departing Geneva tonight to meet North/Secord in Frankfurt tomorrow (Sunday) morning. Nir and Ghorbanifar depart London tomorrow and have called 83 The Maximum Version and the Historical Chronology both state: "On June 10, Majlis Speaker Rafsanjani, in a speech in Tehran made guarded reference to Iranian interest in improved relations with the U.S. On July 26, Father Lawrence Jenco was released in the Bekka Valley and found his way to a Syrian mili- tary checkpoint." (Maximum Version 8; Historical Chronology 13) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 [Ghorbanifar's Tehran contact] to meet them in Frankfurt, GE, Sunday morning. The purpose of the meeting is to assess Iranian expectations and ability to release the remaining Iranian hostages. (North to Poindexter, 7/26/86) North prepared talking points for the meeting, which Poin- dexter approved on July 26. (North to Poin- dexter, 7/26/86) -You have seen the President's state- ment regarding the release of Father Jenco. This is very much in line with what your people had suggested. -Our government remains prepared to open direct and private discussions with your government leading to a normalization of relations. -We recognize the important role played by your government in the re- lease of Father Jenco and regard this to be a very positive step. -It is important that there not be any misunderstandings or false expecta- tions regarding the release of Father Jenco. -On every occasion, including our meetings in Tehran, we made it clear that we were not going to barter over the lives of human beings. -While we are not empowered to ne- gotiate with you regarding any further deliveries of materiel, it is important that you recognize that the under- standing we proposed in Tehran is still operative. We have been instruct- ed to report back to our government any changes to this proposal. -We continue to believe that a direct channel of communication, which will prevent misunderstandings is impor- tant. As we indicated in Tehran, we are prepared to dispatch a secure sat- ellite communications team to Tehran to facilitate this communication. ("North/Cave Talking Points," Tab II to North to Poindexter, 7/26/86) North and Cave met with Nir and Ghorbani- far the afternoon of July 27. North reported: Lengthy meeting this afternoon with Gorba and Nir followed by discussion with [the official in the Prime Minister's office] via phone. Following are salient points. [The Iranian official] believes he has demon- strated his ability to perform and has ex- pectations we are now prepared to deal. Despite our earlier and current protesta- tions that we want all hostages before we deliver anything, this is clearly not the way they want to proceed. They see clearly that the ball is now in our court. In discussion with [the Iranian official] he repeatedly asked quote-"When are you going to de- liver". While [the official] made no specific threat, he noted that he was under intense pressure and could not totally control events. We will call him back 28 July at 1100 Frankfurt time and urge that he come to Europe for a meeting and to do nothing rash in the meantime. We are trying to make this idea attractive-using [his inter- est in the U.S. establishing] a "special ac- count" for him as an incentive. Jenco has expressed a desire to thank the three world leaders responsible for his release. The Pope, The Archbishop of Canterbury and RR. The first two intend to oblige. Can we deliver on the last? Unodir [unless other- wise directed] we will call [the Iranian offi- cial] in A.M. and urge him to meet us in Europe ASAP. Since it will take him several days to get authorization to come, we plan to return to D.C. via Pan Am 061 on 28 July and report to JMP in evening. Please advise via this channel if other instructions obtain. Warm regards. North/Cave. Bottom line, is that if we want to prevent the death of one of the three remaining hostages, we are going to have to do some- thing. [Handwritten at bottom: "Put this in a sealed envelope and have Ollie pick it up." JP] (Document misdated 6/27/86) Another version of this message contained the following: P.S. Please call Dewey and tell him George will send hard copy to he [sic] and [C/NE, CIA DO] in A.M. via NIACT. Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 (Id.) Yet another version, bearing the word "done" with a tick mark next to the P.S., has the following handwritten note: "Read all to JMP, except P.S. 7/27 1830." (Id.) According to North's calendar, North met Jenco in Germany on July 29. On the same day, he set forth his views on the next steps regard- ing hostages in a memorandum to Poindexter. The debrief of Father Jenco has proceeded well and he continues to cooperate fully with our team. Though Jenco's geographic knowledge is understandably limited by the brief time he was in Beirut before he was seized and the conditions of his captivity, he has made every effort to answer our questions. [Terry] Waite is accompanying Father Jenco to meetings with the Pope and the Archbishop of Canterbury on Wednesday and Thursday. Father Jenco is scheduled to meet with the President on Friday, August 1, at 2:00 p.m. Based on information derived from the Jenco debrief, our discussions with Ghor- banifar, Nir, and [the Iranian official]; and the videotaped and private messages deliv- ered by Jenco, we have drawn the follow- ing conclusions: -Jenco was released as a direct result of action taken by [the official in the Iranian PM's office] on or about July 21. -Though Iranian influence over the hostage holders is still considerable, the captors themselves are increasingly disenchanted with the Iranian relation- ship: -The delay between [the Iranian official's] "instruction" to the cap- tors on July 21 and the actual re- lease on July 24 was likely occa- sioned by the hostage holders need to find a new prison site, ar- range for the videotape by Jacob- sen, place their story in An Nahar. -The Iranians have been unable to deter the Syrians from moving in strength against Hizballah strongholds in Lebanon. -The continued reluctance of the Hizballah itself to follow precise Iranian instructions on how to re- lease the hostages is seen as an in- dication of efforts by Hizballah to demonstrate at least partial inde- pendence. -[The Iranian official] believed that he had consummated an arrangement with the Americans through Ghorbani- far on the terms for release of the hos- tages. -[The Iranian official's] expectations regarding the immediate delivery of the 240 HAWK missile parts were ap- parently transmitted to higher author- in Iran. Discussions with [him]- in ity Europe (Sunday, July 27) and calls from him today indicate that [he] is in considerable personal jeopardy as a consequence of not having received what he believed we promised. -It is entirely possible that if nothing is received [the Iranian official] will be killed by his opponents in Tehran, Ghorbanifar will be killed by his credi- tors (they are the beneficiaries of a $22M life insurance policy), and one American hostage will probably be killed in. order to demonstrate dis- pleasure. -Although the Dawa 17 in Kuwait continue to be mentioned as the ulti- mate demand on the part of the hos- tage holders, Jenco himself does not believe this and we have not seen ref- erence to this issue since our meeting in Tehran (Tab B). It is obvious that the conditions for the re- lease of the hostages arranged between Ghorbanifarland [the Iranian official] are unacceptable. 'Nonetheless, we believe that Ghorbanifar acted on what he considered to be the following arrangement: Step 1: One hostage released and $4M to Ghorbanifar for it~ms removed from the aircraft in Tehran during the May visit (Ghorbanifar received the $4M on July 28). Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Step 2: Remainder of 240 parts- plus full quota of electron tubes (Item 24 on Irani- an parts list) and 500 TOWs delivered to Iran. Step 3: Second hostage released and Ghor- banifar paid for remainder of 240 parts. Step 4: 500 TOWs, and 1 HIPAR radar de- livered. Step 5: Third hostage released and Ghor- banifar paid for one radar. Step 6: Meeting in Tehran to discuss future followed by release of the last hostage and delivery of second HIPAR radar. We believe that the mixture of HAWK parts and TOWs is designed to satisfy both the military and the revolutionary guards in Iran. At this point, [the Iranian official] will probably be able to retain his credibil- ity if just the 240 parts are delivered from Israel. We believe that he can be convinced to follow-up this delivery with a meeting in Europe to discuss next steps. At such a meeting, we should endeavor to produce a concrete schedule that is agree- able to both parties and which allows all remaining hostages to be released simulta- neously. The Jenco release . . . indicate[s] that this is clearly within the power of the Iranians, if they are so inclined. While they will continue to haggle over prices, timing, and sequence, the delivery of the 240 should help to assure the Iranians that we will keep our word. It is important that a face-to-face meeting occur so that we can establish the terms rather than having Ghorbanifar negotiate for us. Finally, even after the parts are delivered, we still retain some leverage over [the Iranian official]: -He has been told that we have video tapes and photographs of him meeting with us in Tehran and he is concerned that we could make these public. -He also wants assurance of asylum in the U.S. should "things go wrong." He has been told that we are prepared to offer such and need to meet with him to arrange exfiltration procedures. We intend to use this ploy as a further reason for establishing a direct com- munications link in Tehran. RECOMMENDATION That you brief the President regarding our conclusions on the Jenco release as indicat- ed above and obtain his approval for having the 240 HAWK missile parts shipped from. Israel to Iran as soon as pos- sible, followed by a meeting with the Irani- ans in Europe. (North to Poindexter, 7/29/86) Poindexter ini- tialed "Approve" and wrote: "7/30/86. Presi- dent approved. JP." A member of the Hostage Location Task Force reported, on July 30, that Charlie Allen advises that the President today approved further shipments of arms to Iran in response to the release of Rev. Jenco. Apparently, internal White House disagreements over who was responsible, the Syrians or the Iranians and, ultimately, the [Ghorbanifar-Iranian official] connec- tion. The Vice President was in Israel on July 29. While there, he met with Nir. The Vice Presi- dent told the Board that, before the meeting, he had been uneasy, and tried to call Poin- dexter. Failing to contact Poindexter, Mr. Bush spoke to North who indicated that the Israeli Prime Minister thought the meeting with Mr. Nir was important for the Vice President to meet with Nir. According to the Vice President, North had originally requested that the Vice President meet with Nir on the basis that the Israeli Prime Minister thought the meeting was important. North's position was apparently confirmed when after the meeting with Nir, the Israeli Prime Minister asked Mr. Bush how the meeting had gone. The Vice President indicated that there had been no discussion of the Nir meeting be- tween himself and the Israeli Prime Minister. (W. Clark McFadden II, "Discussion with the Vice President," 12/29/86) The Vice President expressed concern to the Board about what he perceived as the extent to which the interests of the United States were in the grip of the Israelis. Now, ac- cording to the Vice President, the Israelis themselves may be in some sense seeking cover. Vice President Bush related that his Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 discussion with Mr. Nir was generally about counterterrorism. There was no dis- cussion of specifics relating to arms going to the Iranians, e.g., the price of TOW missiles was never raised. (Id.) The Vice President's Chief of Staff, Craig Fuller, attended the meeting and memorialized THE VICE PRESIDENT'S MEETING WITH MR. NIR-7/29/86 0735-0805 PARTICIPANTS: The Vice President, Mr. Nir, Craig Fuller DATE/TIME: 7/29/86 0735-0805 LOCATION: Vice President's suite/King David Hotel, Jerusalem 1. SUMMARY. Mr. Nir indicated that he had briefed Prime Minister Peres and had been asked to brief the VP by his White House contacts. He described the details of the efforts from last year through. the current period to gain the release of the U.S. hostages. He reviewed what had been learned which was essentially that the radi- cal group was the group that could deliver. He reviewed the issues to be considered- namely that there needed to be ad [sic] de- cision as to whether the items requested would be delivered in separate shipments or whether we would continue to press for the release of the hostages prior to deliver- ing the items in an amount agreed to pre- viously. 2. The VP's 25 minute meeting was ar- ranged after Mr. Nir called Craig Fuller and requested the meeting and after it was discussed with the VP by Fuller and North. Only Fuller was aware of the meeting and no other member of the VP's staff or trav- eling party has been advised about the meeting. No cables were generated nor was there other reporting except a brief phone call between Fuller and North to advise that "no requests were made." 3. Nir began by indicating that Peres had asked him to brief the VP. In addition, Nir's White House contacts with whom he had recent discussions asked him to brief the VP. 4. Nir began by providing an historical perspective from his vantage point. He stated that, the effort began last summer. This early phase he said "didn't work well." There were more discussions in No- vember and in January "we thought we had a better approach with the Iranian side," said Nir. He said, "Poindexter ac- cepted the decision." 5. He characterized the decision as "having two layers - tactical and strategic." The tactical layer was described as an effort "to get the. hostages out." The strategic layer was designed "to build better contact with Iran and to insure we are better prepared when a change (in leadership) occurs." "Working through our Iranian contact, we used the hostage problem and efforts there as a test," suggested Nir. He seemed to suggest the test was to determine how best to establish relationships that worked with various Iranian factions. 6. Nir described Israel's role in the effort by saying, "we activated the channel; we gave a front to the operation; provided a physical base; provided aircraft." All this to "make sure the U.S. will not be involved in logistical aspects." Nir indicated that in the early phase they "began moving things over there." 84 7. Before a second phase a meeting was desired. Nir indicated a February meeting took place with "the Prime Minister on the other side." Nir did not make it clear who else attended the meeting. He said the meeting was "dramatic and interesting." He said "an agreement was made on 4,000 units-1,000 first and then 3,000." The agreement was made on the basis that we would get the group," Nir said. "The whole package for a fixed price," he said. 84 Charles Allen told the Board that he remembered the memorandum as reporting Nir to have talked about the Israelis initiating, taking the initiative, proposing this, sort of directing this. I think probably overstated my understand- ing of the situation. Indeed, I think they were proposing it and pressing it on the United States, but based on my understanding and all the memoranda that I have put together is that Mr. McFarlane saw a real strategic need to pursue this effort. And also, an ancillary aspect was to solve the hostage problem in order to move to broader relationships. (C. Allen (2) 13-14) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 8. Although there was agreement the other side changed their minds and "then they asked for the other items," according to Nir. "We were pleased because these were defensive items and we got to work with the military," said Nir. He continued, "there were 240 items on the list we were provided and we agreed to it." 9. A meeting was organized for mid May in Tehran to finalize the operation. The VP asked Nir if he attended the meeting and Nir indicated he did attend. Nir said, "two mistakes were made during this phase." "Two people were to be sent to prepare for the meeting but the U.S. had concerns about McFarlane," according to Nir. He described the meetings as "more difficult- total frustration because we didn't pre- pare." And he said, "their top level was not prepared adequately." During the meeting in Tehran the other side kept re- minding the group that "in 1982 there was a meeting which leaked and the Prime Min- ister was thrown out of office." Nir said that at the end of the May meeting, "they began to see the light." "McFarlane was making it clear that we wanted all hostages released," Nir reported and, "at the last moment the other side suggested two would be released if those at the meeting stayed six more hours." According to Nir, "the Deputy Prime Minister delivered the request (to delay departure) and when the group said `no,' they all departed without anything." 10. According to Nir, "the reason for delay is to squeeze as much as possible as long as they have assets. They don't believe that we want overall strategic cooperation to be better in the future. If they believed us they would have not bothered so much with the price right now." Further, accord- ing to Nir, "there are serious struggles now within the Iran power groups. Three leaders share the view that we should go ahead but each wants to prove his own toughness." 11. Turning to what Nir said was the final or most recent phase, he reported, "we felt things would just die if we didn't push for- ward to see what could be delivered. They asked for four sequences, but we said no to talks until they showed something." 12. According to Nir, he told them about 10 days ago he would cancel the deal. Then nine days ago their Prime Minister called saying that they were taking steps to release one-the Priest. The second one to be released would be Jacobson. The Prime Minister also said that one would be re- leased and then "we should give some equipment." Nir indicated to the VP that the bottom line on the items to be deliv- ered was understood to be the same or even less but it was not the way the deal was originally made. The items involved spares for Hawks and TOWs. No denial or approval was given according to Nir. Nir said he made it clear that no deal would be discussed unless evidence is seen of a re- lease. 13. On Tuesday or Wednesday a message was intercepted between Tehran and the guards according to Nir. On Friday, three hostages were taken out and on Saturday Janco [sic] was taken out, put into a trunk and driven to a village in the Bakka [sic] Valley. Nir then described what Janco re- ported with regard to the conditions under which he was held and what he knew of the other hostages including Buckley. (I assume we have detailed briefing already.) The VP asked Nir if he had briefed Peres on all of this and he indicated that he had. 14. Nir described some of the lessons learned: "we are dealing with the most radical elements. The Deputy Prime Minis- ter is an emissary. They can deliver . . . that's for sure. They were called yesterday and thanked and today more phone calls. This is good because we've learned they can deliver and the moderates can't. We should think about diversity and establish other contacts with other factions. We have started to establish contact with some suc- cess and now more success is expected since if these groups feel if the extremes are in contact with us then it is less risky for the other groups-nothing operational is being done . . . this is contact only." 15. Nir described some of the problems and choices: "Should we accept sequenc- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ing? What are alternatives to sequencing? They. fear if they give all hostages they won't get anything from I. '. If we do want to move along these limes we'd have to move quickly. It would be a matter still of several weeks not several days, in part be- cause they have to move the hostages every time one is released." 16. Nir concluded with the following points: "The bottom line is that we won't give them more than previously agreed to. It is important that we have assets there 2 to 3 years out when change occurs. We have no real choice than to proceed." 17. The VP made no commitments nor did he give any direction to Nir. The VP ex- pressed his appreciation for the briefing and thanked Nir for having pursued this effort despite doubts and reservations throughout the process. BY: CRAIG L. FULLER [initialed:] "CF 8/6/86" IX. New Wine in Old Bottles? July-November 1986 Jenco's release coincided with expressions of interest by Iranian officials in improved rela- tions with the United States. At the same time, three Americans remained hostage in Lebanon. American officials, already dissatisfied with Ghorbanifar as an intermediary, were ready to try other channels of communication with Iran. American goals remained unchanged. A. Sequentialism Pursuant to the President's decision of July 30, 1986, on August 3, the United States deliv- ered twelve pallets of HAWK spare parts to Iran. ("Adams" [Secord] to [?North], 8/2/86) Israel provided logistical assistance. (CIA/IG Chronology 28; Maximum Version 8; Historical Chronology 13) 85 On August 2, Secord report- ed: 1. Planning to operate 707 TAIL No. EI- ptm fm Ben Gurion to Bandar Abbas. 85 The Historical Chronology contains the following summary of events in August: On August 3, the remaining three pallets (less than 1/2 plane- load) of electronic parts for Iranian anti-aircraft defenses (HAWK missile sub-components) arrived in Tehran. As in all flights to/from Iran this delivery was made with an Israeli Air Force aircraft (707) using false flag markings. Timing of the Cargo Wt. 48000 lbs. 12 Pallets. ETD 2400L-2100Z and ETA is 0730L-0400Z. Rt of flt is down red sea, East btwn S. YEMEN and Socotra to vic Char Bahar, Direct to Bandar Abbas. Expect EI-PTM to contact Bandar Abbas approach control, circa 0700L-0330Z on VHF 124.2 Pt. 2. Pls ensure authorities in Bandar Abbas know we are coming and are ready to off load and refuel the 707. Fuel is expected to be free as in the past. Past experience shows that the authorities at Bandar Abbas are not in the picture and much confusion re- sults. pls get Sam [O'neil] to emphasize this to the Australian [coverterm for offi- cial in Iranian Prime Minister's office]. We wd like to get out of Bandar Abbas and delivery was based on coordination among U.S., Israeli and Iranian officials. In early August 1986, the contact with the Iranian expatriate [Ghorbanifar] began to focus exclusively on the willingness of the USG to provide military assistance to Iran in exchange for hostages and we sought to establish different channels of com- munication which would lead us more directly to pragmatic and moderate elements in the Iranian hierarchy. In mid- August, a private American citizen (MGEN Richard Secord, USAF [Ret.]) acting within the purview of the January Covert Action Finding, made contact in Europe with ' ? ' a relative a a ' of a senior Iranian official a ? ?. With the assistance of the CIA, this Iranian was brought covertly to Washington for detailed discussions. We judged this effort to be useful in es- tablishing contact with a close confidant of the man judged to be the most influential and pragmatic political figure in Iran '). These discussions reaffirmed the basic objectives of the U.S. in seeking a political dialogue with Tehran. We also pro- vided assessments designed to discourage an Iranian offensive and contribute to an Iranian decision to negotiate an end to the war. (Historical Chronology 13) The Maximum Version of the deliv- ery of spare parts omits the last two sentences in the first para- graph quoted above. (Maximum Version 8) The Historical Chro- nology added the following sentence to the second paragraph quoted above, from the Maximum Version (id at 8-9): "The as- sessments also detailed the Soviet threat to Iran." (Historical Chronology 13) Cave told the Board that "the decision to get rid of Ghorbani- far was on our part to clean this up operationally, so that we had better control." (Cave 25) Furmark told the Board that, when he and Ghorbanifar dis- cussed "the inflated pricing" in August, Ghorbanifar said the money may have gone to the Contras, or the Afghans, or someplace. And he even said-and he said that North told him that now they've passed this bill, if we don't complete this transaction we'll pay you the money back, the $10 million; they passed the Aid to the Contras bill-so Ghorbanifar said, if they never complete the deal we'll still get our money back because now they can, you know. So that's an inference that the money was used and they'll repay it back. (Furmark 17) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 return here in Daylight hours. Pt. 3. 707 will transmit ops normal position reports in blind to IAF command post on HF/SSB Freqs Night: 8739 or 5605 or 10475 or 3115; Day: 8858 or 11290 or 12600. Re- ports will be given abeam jidda, Socotra and approaching B. Abbas. Pt. 4. It is now 7 hrs til planned takeoff. If coord w/ Tehran cannot be accomplished, we plan 24 hr delay. ("Adams" [Secord] to [?North], 8/2/86) Shortly before taking a vacation. North went to London on August 7. (North calendar) 86 Toward the end of August, after returning from vacation, North reported to Poindexter the latest Iranian and Nicaraguan information. We have had an intensive series of discus- sions w/ Nir, Gorba and [Ghorbanifar's Tehran contact] over the past 48 hrs. It is not clear whether Nir/Gorba are aware that we are talking directly to . . . . Basic proposal as outlined to you over phone remains unchanged; i.e., sequential re- lease for sequential deliveries. We must, however resolve the problem of how to provide the parts which we promised but do not have in stock. [C/NE] has as- signed an officer to work w/ Army logistics in an effort to find (or manufacture, if nec- essary) the missing/wrong items. Both Gorba and [his Tehran contact] have been told not to ship the 63 defective/wrong parts back and that we will backhaul them 86 North requested travel orders to go to Frankfurt on August 6. According to the NSC staff Chronology of Events, dated 11/ 20/86, the first American contact with [The] relative occurred in London and Madrid on August 10. North wrote McFarlane on October 3 that [the] relative came into contact with us through Dick Secord who met him in Brussels while arranging a pick-up for our friends in a certain resistance movement." (North PROF note to McFarlane, 10/03/86, 22:08:16) North was on leave when the Director of Central Intelligence briefed Poindexter on Cave's meeting, July 25, with Tabatabai in London. Vincent M. Cannis- traro of the NSC staff wrote Poindexter that Tabatabai "claims to be a channel to Rasfanjani and has passed the usual message via Cave that the Iranian government wishes to establish a regular channel to the U.S. but is constrained until after the end of the war with Iraq. (We also know that Tabatabai has made contact with some of the Iranian exile groups in Paris-particularly the Ali Amini crowd. His bonafides [sic] as an authentic channel to Rasfanjani, however, have yet to be proven.)" (Cannistraro to Poindexter, 8/13/86) on the next delivery. Copp has been told to keep a crew in readiness for a further mission and has been apprised of the gen- eral parameters of the arrangement. He notes that from a logistics perspective, the sequential arrangement is preferable in that it requires only one crew and one A/C throughout thus reducing visibility and en- hancing OPSEC. We should have a better fix on availability of parts early in the week and meanwhile have told Gorba and [the official in the Prime Minister's office] that both sides should bring a technical expert familiar w/ the appropriate system to the meeting. [The Iranian official] told Geo. [Cave] this morning that it wd be best to bring an expert w/ us to Tehran for the meeting and he could see for himself what the problems are. Having discussed this proposal this a.m. w/ both Clarridge and Cave we all believe this to be the best course of action, especially if we can leave our "technical expert" and a communica- tor behind in Tehran. CIA is now looking for a good Ops officer who is familiar w/ the system. Dick already has one identified but CIA wd prefer to use its own officer if they can find one. We should get back to [the Iranian official] w/ an answer by Monday [August 25]. All 'of us rate the risk to be relatively low, particularly given the experience we had in May. If you approve, we wd use [false] documents (as we did in May) and go in via the Iran Air flight to/ from Frankfurt. Estimated time on mission wd be two days. We wd plan to go over a weekend to reduce visible absence fm D.C. NEW SUBJECTS:. . . On the hostages-I just don't know. One of the things that has concerned me for some time was the report that you got from Copp [Secord] about how the parts really help their problem for lack of test equipment, not ordering all of the right parts and the lack of knowledge of the system. If we get into a sequential arrange- ment, we really have to be prepared to de- liver a lot more material and arrange a rather continuing technical agreement. Of course that could all be done, but after the hostages are released. I just don't see how Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 we can have such a continuing relationship until that happens. . . . Before we agree to a sequential arrangement I think we ought to straighten out our committment on the 240-that alone will help establish our good faith that we aren't trying to cheat them. Then we should wait a bit and see what [a friendly country approach] de- livers.. . . (Poindexter PROF note to North, reply to note of 8/23/86, 15:52) On August 25, Secord met with the Relative of a powerful Iranian official (the "Relative"). Secord reported to North: 1. Following is summary report of three long meetings-total circa eight hours- with Iranian gp visiting Brussels. Meetings took place August 25 in three segments. Iranian side was [the Relative], and [a] former Iranian Navy officer-20 years-and alleged London businessman now-defi- nitely an important agent for Rafsanjani gp and possibly Savama. Our side included me-true name-Abe [Hakim] in true name, and [another Iranian expatriate], our agent. Meetings constituted comprehensive tour de force regarding Iran/Iraq War, Ira- nian views of U.S. and other western poli- cies, Soviet activities, activities of nearly all important Iran government figures, hostage matters, activities in the Hague, and Iranian forces equipment and materiel shortages. classified as a crook. [The Relative's] wealth of current information but also vol- unteers to discuss hostage matter and USG connection with Rafsanjani in next 10 days. He will then return to Brussels for meeting with us. [The Relative] said categorically he would not screw up [official in Prime Minister's office, Cave] efforts but would carefully examine them for feasibility. [The relative] will recommend two courses to Rafsanjani: a. Assist in current . . . effort [by offi- cial in Prime Minister's office] to re- lease hostages or start new effort. b. Provide us with current intelligence on their location, etc., . . . [The rela- tive] says there are many specific things USG can do in the Hague and on Voice of America programming to help start USG/GOI talks-he will give us documents on these subjects at next meeting. 3. Numerous military supply problems were discussed and I will detail these for you later this week in Washington. FYI: They need oil barter deals. 4. My judgement is that we have opened up new and probably much better channel into Iran. This connection has been effec- tively recruited and he wants to start deal- ing. Recommend you plan on bringing George to next meeting in two weeks or less. 2. Special interest items included claim that an "Al Haig gp" and "a Senator Ken- nedy gp" have recently tried to meet with [the Relative]-he has declined-he wants to deal with the Presidents [sic] representa- tives. [The Relative] is very sharp, well educated youngman [sic]-speaks no Eng- lish. [He] is well-known favorite of [Majlis speaker] Rafsanjani . . . They badly need air defense items, armor spares, TOWs, gun barrels, helo spares, and tactical intel- ligence. I told them all things negotiable if we can clear the hostage matter quickly. [The Relative] knew great deal about McFarlane msn to Thn. He also knows all about [the official in the Prime Minister's office], Gorba, Israeli connection, and this gps financial greed. Gorba was nastly [sic] (Secord ("Copp") to North, 8/26/86) 87 On August 27, the Relative informed Secord that the Iranians were trying to buy TOWs in Madrid at a cost of $ 13,000 each. Secord thought it was "a big steal." The United States was not involved, and the Relative reportedly worried that the transaction could upset the 87 An undated, unsigned note, adds a grace note to Secord's message: [The Relative] claims he can be of great assistance in establishing the right relation. The Hague, he claims, is the best avenue. NOTE: The report goes into detail regarding the above 3 items. E. [Secord's Iranian expatriate agent's] recommendations: Try everything not to lose this man if he can not be a representative of [Rafsanjani] he definitely is trainable to be an excellent source in country. P.S. [Rafsanjani] participated with Hafezalasad for release of Hostages. The release of the rest is possible. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 effort to establish a new relationship with the United States. (Secord to [?North], 8/27/86; North to Poindexter, 9/2/86) 88 On September 2, North formally proposed trying to use the new connection with the Rela- tive. He wrote Poindexter: NEXT STEPS WITH IRAN Ongoing Activities There are currently five separate activities underway which are related to resolution of the American hostage situation and a potentially broadened relationship with the Government of Iran: -[Third Country] Initiative: [The For- eign Minister] has been given a mes- sage for delivery to the Iranian For- eign Ministry indicating a willingness on the part of the USG to improve re- lations with Iran and to undertake direct, private discussions with respon- sible Iranian officials. No response has yet been received. -[Another Third Country Connection]: [It's] Ambassador in Tehran during a meeting with Rafsanjani discussed the hostage situation and further U.S.-Ira- nian contacts. Rafsanjani, for the first time, suggested certain materiel (F-14 spare parts and embargoed helicop- ters) as items that could cause Iran to act on behalf of the American hos- tages. Per instructions, [that govern- ment was] advised that such "barter arrangments" were unacceptable to the U.S. and contrary to our policy. [They] remain willing to advise Raf- sanjani that we are prepared to hold private discussions with the Iranians. -[The Relative]: In coordination with the CIA, Copp and two of his associ- ates met for two days last week with [the Relative] indicated a full aware- ness of the May trip to Tehran and the ongoing activity involving [the official 88 At North's request, on September 2, Charles Allen tipped law enforcement officials of another possible arms transfer to Iran from Houston. Ghorbanifar and Khashoggi were thought to be involved. (C. Allen, Memorandum for the Record, 9/2/86; Earl PROF note to North, 8/28/86, 19:09) in the Prime Minister's office] and Ghorbanifar. [The Relative] clearly in- dicated that he had c specific mandate from [Rafsanjani] to meet with USG official seeking a means for "getting beyond the hostage issue" and [the Relative] starting a dialogue with the USG. [The Relative] has returned to Tehran and has since informed us of a pending TOW sale through Madrid and further indicated that he is pre- pared to proceed with further discus- sions. He has further noted that the government in Tehran is very con- cerned over Soviet activities in the Gulf and is aware that a "final victory" over Iraq will not be possible. There is considerable evidence that [the Rela- tive] is indeed a bonafide [sic] inter- mediary seeking to establish direct contact with the USG for Rafsanjani's faction within the Government of Iran. -[Official in Prime Minister's Office]/ Ghorbanifar: Since the release of Father Jenco, that portion of the 240 parts which was available has been deliv- ered. The Iranians have advised through Nir that at least 63 89 of the items delivered are improper or inop- erable. Further, 299 of the items promised have not been received. They have offered to return the dam- aged/incorrect parts, but have been told to return them on a "future deliv- ery flight." The Iranians continue to insist on a sequential delivery process and in a meeting in London with Nir a specific seven step delivery/release pattern was proposed: -Deliver 500 TOWs and the 39 electron tubes for the HAWK system previously requested. -[Hostage] released. 89 In a number of telephone conversations taped by Cave early in September, Cave and the Iranian official talked about the problems associated with what the Iranian official said were 65 "broken" parts. (Transcripts of telephone calls) The confusion over the number of spare parts to be shipped apparently results from the fact that certain of the line items requested included multiple parts. (Army/IG Report) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 -Deliver 500 TOWs and one of the HAWK radars previously re- quested. -[Hostage] released. -Meeting in Tehran to discuss broadened relationship, Soviet in- telligence, etc. -Deliver remaining radar and 1000 TOWs while we are in Tehran. -[Hostage] released and Buck- ley's body delivered. CIA concurs that the [Iranian official]/ Ghorbanifar connection is the only proven means by which we have been able to effect the release of any of the hostages. Though the sequential plan is not what we prefer, the commodities and quantities are within the framework of our original un- derstanding. CIA believes that we should proceed expeditiously with the Ghorbanifar connection and pursue the other five alter- natives as subsidiary efforts. (Tab I, "Next Steps with Iran," to North to Poindexter, 9/2/86) The copy obtained by the Board of North's Action Memorandum, to which this document is attached, shows a check mark next to the word "Approve". North was impatient for Poindexter's approv- al of the plan. He wrote McFarlane that evening: We still have no response fm JMP re pro- ceeding w/ the sequential release proposal outlined to you some time back. Have now undertaken to have Casey raise same w/ JMP tomorrow at thr weekly mtg. The things one must do to get action. Am hopeful Bill can push hard enought [sic] to move on the matter. Nir will be here next week and will raised [sic] enough hell to move it if it hasn't all fallen apart by then. The basic problem, as you know, is that we dither so long on these things that by the time we're ready to go to bat, the rules have changed again. I agree w/ yr assess- ment that the next mtg in Tango [Tehran] is unlikely to be for some time. My hope is that we will not be trying to adjust yr sched for next June for this mtg. (North PROF note to McFarlane, 9/3/86, 20:12:50) At the same time, the families of the hostages called North to complain about the " `deal' " being made for Daniloff, a U. S. News & World Report journalist arrested in Moscow, apparent- ly in retaliation for the arrest in New York of a suspected KGB agent. North reported on Sep- tember 8: Some, like Jacobsen's son Paul accused us of being callous to the LebNap victims- and unwilling to pressure the Kuwaitis be- cause the issue has "slipped from the public eye and that we are willing to make deals for Daniloff because it was more im- portant to the President because of the vis- ibility." All indicated that they are plan- ning to hold a press conference later this week to "turn the heat on" the Administra- tion. My rejoinder that no deal for Daniloff was in the mill was, because of earlier press coverage to the contrary, not taken seriously. Bob Oakley has made a similar effort w/ the same unfortunate results. This afternoon, Louis Boccardi, President of the AP came to see me. He is supportive of our policy on terroprism [sic] and on the hostage issue-and notes that we are not credible in saying that a deal was not in the making. He pointedly noted that this could well have an effect on Terry Ander- son's fate in that the Hizballah could not but take heart from the talk of our willing- ness to deal with the Soviets over Daniloff. While it was an amiable discussion, I was impressed by his concern that no matter what we do now re Daniloff, we are going to be perceived as having made a deal that will hurt chances for Anderson's release and jeopardize his other reporters else- where. He made cogent observation that I think is relevant: "I sure hope that you are dealing with someone regarding Terry and the others in Lebanon-and that you can keep it quiet-that's the only way that any of this will work." (North PROF note to Poindexter, 9/08/86, 19:08:10) On the same day, North updated his paper on "Next Steps with Iran" for Poindexter to use with the President. In North's view: Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 [The Relative] continues to indicate that he has a specific mandate from [Rafsanjani] to meet with USG officials seeking a means for "getting beyond the hostage issue" and starting a dialogue with the USG. -[Iranian official]/Ghorbanifar:? Pursuant to guidance, efforts were made over the weekend to convince [the Iranian official] to release of [sic] all three Americans simultaneously. He stead- fastly rejected this proposal citing the intransigence of the captors and Irani- an inability to ensure results. -Since last week, CIA and Army Lo- gistics have located a significant number of HAWK parts which had previously been listed as "unavail- able." We now believe that the total "package" will be sufficient to entice the Iranians to proceed with the se- quential release pattern proposed in the London meetings. -Since Sunday [September 7], [the Iranian official] has sought, in dozens of calls, to contact Abe [Hakim], Goode [North], Sam [Cave] and Copp [Secord]. This afternoon, when Sam returned call to him he told Sam that his "boss approved of the meeting that was to take place" and referred specifi- cally to the meetings two weeks ago with [the relative] in Brussels. CIA evaluates this information as confirma- tion that Rafsanjani may be moving to take control of the entire process of the U.S. relationship and the hostages. Other Issues This weekend, . . . an eleven minute ad- dress by the Shah's son [was broadcast] over Iranian T.V., by pirating the national network broadcast frequency. This broad- cast reportedly sparked protests in Tehran and elsewhere by supporters of the Shah's family. [The Iranian official], in one of his calls to Sam, asked pointedly how it was that we could profess to "accept the Irani- an revolution as fact". and still sponsor such an event. Separate intelligence reporting indicates that a major Iranian offensive is likely to occur on/or about Monday, September 22-the anniversary of Iraq's attack against Iran in 1980. Given the urgency of calls from Iran and Rafsanjani's apparent will- ingness to endorse U.S./Iranian discus- sions, Iran may be making all possible at- tempts to acquire requisite arms to support this "final offensive." Director Casey conducted a review of the Iranian project today and has directed his people to initiate necessary preparations for acquiring the parts promised in earlier discussions with the Iranians. CIA contin- ues to believe that the [Iranian official]/ Ghorbanifar connection is the only proven means by which we have been able to effect the release of any of the hostages. Though the sequential plan is not what we prefer, the commodities and quantities are within the framework of our original un- derstanding. CIA believes that we should proceed expeditiously with arrangements to implement the sequential plan proposed by [the Iranian official]-with hopes that we could improve on it in discussions with Rafsanjani's representatives when they arrive in Europe. In this regard, our window of opportunity may be better than it will ever be again, if we are able to con- summate the release of the hostages before the Iranian offensive begins. (Tab I ("Supplement Next Steps with Iran") to North to Poindexter, 9/8/86) North also at- tached a report from Charles Allen about a threat to kill the hostages. Allen wrote that "we" believe that the captors were frustrated that they were no closer to freeing the Dawa prisoners than when they captured Buckley. More and more, we suspect that some Hiz- ballah leaders would be willing to settle for the release of the Americans and French in exchange for Shia prisoners held by An- toine Lahad's Southern Lebanese Army. (Allen to Poindexter, 9/8/86, Tab II to North to Poindexter, 9/8/86) The President considered the new Iranian interlocutor, the prospects for a hostage re- lease, and the possibility of a rescue operation at his morning briefing on September 9. (McDaniel log) Later that day, North and Poin- dexter discussed the hostage problem. Allen re- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ported to the Director of Central Intelligence on September 10 that he had seen North short- ly after this meeting. Allen wrote: 2. Poindexter has given Ollie new guidance on the American hostages, namely: -Ollie is to continue to develop links to the Iranian Government through Albert Hakim and Dick Secord of Stanford Technology Associates. (Hakim, as you are aware, has links to [the Relative]. [The Relative] appar- ently is attempting to arrange for Ollie and George Cave to meet with Rafsan- jani, presumably with the next ship- ment of arms to Tehran.) -Ghorbanifar will be cut out as the intermediary in future shipments of cargos to Iran, if at all possible. To cut Ghorbanifar out, Ollie will have to raise a minimumm [sic] of $4 million. -If there is no other channel for fi- nancing future arms shipments, then Ghorbanifar will be used as a last resort. 3. Ollie is greatly relieved by Poindexter's decisions because he feared that John and the President would shut down completely this back channel to Iran because of the kidnapping yesterday of Frank Reed.90 . . . 90 On September 9, Cave informed [the official in the Prime Minister's office] by telephone. Cave informed [him] that Islamic Jihad had seized another hostage. [The Iranian office] said "I know nothing of this. I have no news." (Transcript, 9/10/86) Cave explained that the kidnapping had been undertaken by "Mugniyyah's group." On September 8, Allen had written Poin- dexter that [n]o threat from Mughniyah should be considered idle. He is a violent extremist capable of impetuously killing the hostages. Yet he does not operate without constraints, among them: -Iran, which certainly has significant influence over the cap- tors, including Mughniyah. We doubt that Iran wants the hos- tages disposed of without recompense, -other Hizballah leaders, who probably see in the hostages a val- uable lever over the US and France, and an indirect means of deterring the Israeli Defense Forces from air attacks on Hizbal- lah facilities in the Biqa', and -his own assessment of his self-interest, which would likely reflect that the cost of holding the hostages is minimal whereas killing them would run a serious risk US or French retaliation. As for conducting terrorist efforts against the Gulf states, Mughniyah could certainly do that without killing the hostages. (Allen to Poindexter, 9/8/86, Tab II to North to Poindexter, 9/8/86) Cave told [the Iranian official] that [Handwritten note]-Reed released imme- diately (C. Allen to DCI, 9/10/86) i On September 10, Nir met with Poindexter and North in Washington. To prepare Poin- dexter for the meeting, North wrote: Nir is coming to the U.S. at the urgent re- quest of Prime Minister Peres. Incoming PM Shamir and outgoing PM Peres have agreed that Nir will remain in his current capacity after the change of government in October. You will be meeting with Nir the day before you meet with Defense Minister Rabin. It is likely that Nir has been given the task of approaching the USG on the matter of the hostages and counter-terror- ism-leaving to Rabin broader security issues. Nir arrives in the wake of renewed terrorist attempts against Israel, the Istanbul Syna- gogue attack, and the seizure of another American in Beirut. The Israeli govern- ment has been anxious to consummate the hostage release plan worked out with Iran. Undoubtedly, Peres would like to achieve the release of the Israeli soldier believed to be held by Hizballah before leaving office in October. The Israelis recognize that this morning's seizure of another American in Beirut jeopardizes all previous plans in this regard. It is important to note that Nir has become partially aware of our contact with [the Relative]. He is not aware that we have been advised that the Iranian delegation will be headed by Rafsanjani's brother Mahmoud Rafsanjani, the former Ambassa- dor to Damascus. The Israelis were initially concerned that the USG was moving to es- tablish a separate channel which would not this matter (Reed) has got to be settled as soon as possible. Please look into it and settle as soon as possible because our boss is very very mad. The boss called me at seven and asked me what was going on, then about an hour ago the islamic jihad [sic] announced that they had taken him hostage. He lkthe [sic] head of a college in Beirut, his name is Reed. [The Iranian official]. Yes. Slam O'neilj. You look into this matter, and I will call you this afternoon at about 8 your time, okay? Will you be at home? [The Iranian officials]. Yes, yes, yes. (very dejected). (Transcript, 9/9/86) Mughniyah's brother-in-law was one of the Da' Wa prisoners in Kuwait. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 include the release of the Israeli soldier seized in February. Under instructions, Nir advised that his government's position re- mained as follows: -The Government of Israel has sup- ported this joint effort for over a year and has not at any time acted unilater- ally. -The Government of Israel expects that the effort to obtain the release of hostages held in Lebanon will contin- ue to be a joint endeavor and include U.S. demands for the release of the Is- raeli hostage. Nir has been told that we will continue to support these two objectives and that the U.S. and Israel will work together to that end. Your talking points at Tab I provide a ra- tionale for how contact was established with Rafsanjani and how we expect to pro- ceed. Please note that your talking points indicate that Nir will participate in these discussions. Nir will also be meeting with Director Casey, the OSG-TIWG principals, and Father Jenco, and has asked to meet with the Vice President-who he met with in Israel. The Vice President has not yet agreed to this meeting. RECOMMENDATION That you use the points at Tab I during your meeting. Talking Points Meeting with Amiram Nir -Glad we could have this opportunity to talk again. Understand you have a number of important meetings during your four days here. -We are certainly pleased that you will be continuing in your current ca- pacity during the political transition in October. -I believe our joint efforts to safely recover the hostages in Lebanon and to broaden our relationships with Iran are important to both our nations. -The President recognizes that were it not for your efforts that Weir and Jenco would not yet be free. -We are committed to continuing our joint efforts to achieve the release of all of our citizens-yours and ours. -In that spirit of cooperation, I want to make you aware of an opportunity that we became aware of last week. -In the process of investigating a possible illegal diversion of TOW mis- siles to Iran, Copp made contact with an agent in [country deleted] working the sale. -The European agent indicated that [the Relative] was involved with this purchase. Copp met with [the Rela- tive] in Brussels on August 25, 1986 and advised him that it will not be possible to obtain TOW missiles with- out the help of the USG. -[The Relative] . . . , was clearly in- terested in this possibility and also raised the following points: -He was checking on obtaining TOWs for Moshen [sic] Rafsanjani who is Speaker Rafsanjani's broth- er, who suspected the $16 million deal would not be possible. -[The Relative] had been probed by representatives of Senator Ken- nedy and former Secretary of State Haig concerning the possi- ble release of the hostages. -[The Relative] also knew full details of our meetings in Tehran last May to include the fact that "Miller was an Israeli." -Queried Copp re Iran-Iraq war and Soviet designs in the region. -Noted that Rafsanjani is now head of "Supreme War Council" and wants to change perception of current military situation and es- tablish basis for truce talks with Iraq. -Provided details on immediate needs re TOWs, HAWKs, techni- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 cal spares, and other technical as- sistance. -Provided three scenarios for "getting beyond the hostage issue:" ? Provide us with intelli- gence on current locations and let us (U.S. and Israel) handle the problem. ? Let [the official in the Prime Minister's office] project continue. ? Rafsanjani personally in- tervenes to free hostages. -Would it be possible to set up a meeting between a personal rep- resentative of Rafsanjani and a high-level USG contact? -Yesterday, the Presient [sic] ap- proved proceeding with a meeting with the Rafsanjani representative. Poindexter approved North's talking points. (North to Poindexter, 9/9/86) North had additional news about the abduc- tion of Reed. [The Relative] called Abe [Hakim] last night to advise that Reed was not, repeat not, held by Islamic Jihad, that no Iranian "influenced" groups were responsible, and that Iran wd do whatever they could to find him and either return him or tell us where he is being held. We have not yet gotten a call from [the official in the Prime Minister's office]. back to Sam [O'neil- Cave] on this matter, but hope the news will be the same on that front. If it is, we may well be getting somewhere w/ the highest levels of the present regieme [sic]. (North PROF note to Poindexter, 9/11/86, 07:17:56) On September 13, Poindexter informed North that he had discussed "our plans on the hostages" with the Director of Central Intelli- gence "and he is on board. Also went over the Secord matters. Bill agrees Secord is a patriot. He will check into our suspicions. I told him he could get more detail from you." (Poindexter PROF note to North, 9/13/86, 12:01:00) The Prime Minister of Israel visited Washing- ton in the middle of September; the Iran oper- ation constituted one of the topics addressed. Nir saw Poindexter and North. As instructed by Poindexter, North prepared briefing papers. You are scheduled to meet with Ami Nir again this afternoon at 1:30 p.m. for 10 minutes. Purpose of this meeting is to de- brief Nir on his meeting with Peres over the weekend. You will then be able to brief the President on Peres' views regarding the several on-going and contemplated initia- tives with the Israelis.. . . Issues, which Prime Minister Peres may raise privately with the President, are out- lined at Tab III. Nir notes that it is unlikely that Peres will discuss any of these with anyone else in the room. RECOMMENDATIONS 2. That you brief the President on the ini- tiatives outlined at Tab III. Approve 'JP Done" POSSIBLE PERES DISCUSSION ITEMS WITH THE PRESIDENT Amiram Nir, the Special Assistant to Prime Minister Peres on Counter-Terrorism, has indicated that during the 15 minute private discussion with the President, Peres is likely to raise several sensitive issues: emphasizing his new role as Foreign Minister. He feels frustrated by the lack of progress and may suggest sev- eral areas wherein the U.S. could boost the image of Israeli flexibility. -Hostages: Several weeks ago, Peres expressed concern that the U.S. may be contemplating termination of cur- rent efforts with Iran. The Israelis view the hostage issue as a "hurdle" which must be crossed enroute [sic] to a broadened strategic relationship with the Iranian government. It is likely that Peres will seek assurances that the U.S. will indeed continue with the cur- rent "joint initiative" and ensure that we will include the two missing Israelis Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 in the process. In that neither Weir nor Jenco would be free today without Israeli help (particularly in logistics), it would be helpful if the President would simply thank Peres for their dis- crete [sic] assistance. [Marginal note in Poindexter's handwrit- ing: Thanks for assistance on Weir and Jenco. Will continue to work Iran with you. Include 2 missing Israelis in it.] -Israeli Arms: On Friday night, De- fense Minister Rabin offered a signifi- cant quantity of captured Soviet bloc arms for use by the Nicaraguan demo- cratic resistance. These arms will be picked up by a foreign flag vessel this week and delivered to the Nicaraguan resistance. If Peres raises this issue, it would be helpful if the President thanked him since the Israelis hold considerable stores of bloc ordnance, compatible with what the Nicaraguan resistance now uses. [Marginal note in Poindexter's handwrit- ing: Rabin, Very tightly held.]. (North to Poindexter, 9/15/86) Once past the visit of the Israeli Prime Minis- ter, the United States entertained [the issue of the Relative]. The morning of September 17, North wrote Poindexter We are planning to bring him [the Rela- tive] into the U.S. at the end of the week, via parole papers thru Istanbul. Iranians can go to Turkey w/o visas and parole papers avoid the necessity of stamping a visa in his passport-a complication which frequently causes major problems for those living in Iran. We (Cave, Clarridge, C/NE, North) decided to honor their request to keep this first meeting private (w/o Nir/Is- raelis) and to have it here so that they can confirm that they are indeed talking to the USG. We knew this when you and Nir met on Monday, but I had not yet had the chance to brief you. We will have a follow- up mtg with [the Relative] in Europe and we will work Nir back into this op then. In the interim, Clair [George] has put a hold on bringing [the Relative] in because he does not know whether you have "ap- proved the operation." Wd you pls call Casey and tell him to get on with moving the guy in so that we don't embarass the hell out of ourselves w/ Rafsanjani. (North PROF note to Poindexter, 9/17/86, 07:56:26) Poindexter replied that he had al- ready enlisted the approval of the Director of Central Intelligence on September 13. "If Clair [George] has a problem," Poindexter noted on North's memorandum on surveillance for [the relative], "he should talk to Casey." (Poin- dexter note on North to Poindexter, 9/17/86) North orchestrated preparations for the visit, which included electronic surveillance . . . (North to Poindexter, 9/17/86, enclosing Casey to Meese, 9/17/86, with Poindexter's concur- rence, and memorandum by Odom) He report- ed to Poindexter: Casey called and told me what he wanted to do. I don't think [Clair] George will be a problem. He was actually enthusiastic about Cave's talking to Khomeini's rela- tive * * *. (Poindexter PROF note North, 9/17/86, 14:35:04) He also explicitly responded to Poin- dexter's note on the memorandum: Per your note on the surveillance package I called Casey and told him we need to get on with the parole paperwork in that you had already agreed - and had furthermore just endorsed the surveillance request. He acknowledged yr approval for the plan but said he as [sic] concerned about Shultz. He said he planned to tell Shultz in general terms that we were talking to another high level Iranian and that we would fill him in after the interview. I protested that experi- ence showed that Shultz would then talk to * * * or * * * who would in turn talk to * * *-and that * * * could well be the source of the Jack Anderson stuff we have seen periodically. Casey Agreed [sic] to proceed with the INS parole paperwork for the Relative and the visa for his escort but noted that he would still talk privately to Shultz about this. We are now under- waywith [sic] getting [the Relative] aboard a chartered jet out of Istanbul. CIA could not produce an aircraft on such "short notice" so Dick has chartered the a/c thru one of Project Democracy's overseas com- Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 panies. Why Dick can do something in 5 min. that the CIA cannot do in two days is beyond me-but he does. How the hell he is ever going to pay for it is also a matter of concern, but Dick is a good soldier and never even groused about it. You may want to talk to Sec Shultz about [the Rela- tive] before Casey does. I will prepare a memo for you as soon as we talk to him. (North PROF note to Poindexter, 9/17/86, 12:59:11) North relied on Secord to bring [the Rela- tive] to the United States. (North PROF note to Poindexter, 9/17/86, 16:19:33) Secord report- ed to North, also on September 17, that: [The Relative] will want intell info and a scheme for future provision of same. In the past, Casey has wanted to establish comms in Tehran and this might be the vehicle. We should give some very good OB data in narrative form so that he can take it back and make an impact. The stuff we used for [the official in the Prime Minis- ter's office] will have changed. It is no big task for an analyst to prepare such a brief- ing. I know there is skepticism about this new connection, but we will fail if we do not use our senses and produce something of use. Next he will want some kind of secure voice device for use in telecoms back here to us in the next few weeks or months-there are a number of these items available commercially and I would hope that CIA could supply same in a briefcase for him to take back. Finally, [the Relative] will want to talk about war material and its relation to a long-term connection from U.S. to Iran. My opinion is that he and his group are attaching more importance to a long-term relationship than to any short- term quick fix, such as a few thousand TOWs. He will, however, have a list of needed items and will no doubt suggest some kind of shipment to clear the hostage matter and to firmly establish direct USG to GOI transactions and to eliminate the Gorbas and [official in Prime Minister's office]. Thus, if I'm right, CIA must deliver the goods re good OB and come up with suitcase secure phone device. (Copp to Goode [North], 9/17/86, 1720) B. The Second Channel in Washington On September 19 and 20, North, Secord, and Cave (as O'neil) met with the Relative and the Iranian expatriate who had introduced him. The two days of negotiations were surrepti- tiously taped. North reported to Poindexter on September 20 that: Talks going extremely well. They and we want to move quickly beyond the "obsta- cle" of the hostages. Sincerely believe that RR can be instrumental in bringing about an end to Iran/Iraq war-a la Roosevelt w/ Russo/Japanese War in 1904. Anybody for RR getting the same prize? . . . (North PROF note to Poindexter, 9/20/86, 12:04:15) Poindexter replied two days later: "Good on the talks. Will look forward to de- brief. Ok on trip to London." (Poindexter PROF note North, 9/22/86, 8:37:02) North gave Poindexter a preliminary report on September 22: Talks with [the Relative] commenced on Friday night and proceeded almost non- stop until Sunday at 1100 when he depart- ed for Istanbul aboard charter. George and Dick agree that things went extremely well. He is assured that the GOI is dealing di- rectly with the USG and that the mutual in- terests of both parties transcend the "ob- stacle" of the hostages-but that this prob- lem must be solved first. Much credit in this goes to Dick, who established the ini- tial contact in Brussels. [The Relative] wants to set up a "joint committee" in Turkey or Portugal for resolving the issues which separate us-an idea which would then lead to putting a discrete [sic] com- munications team in Tehran. At one point he asked if Secord could return with him to advise on how to set this up. He asked specifically for a sign from the USG that we are indeed moving in the right direc- tion and we agreed to a carefully con- structed phrase in a VOA broadcast which would mention the nations which denied access to the hijacked PA 73 a/c-and in- clude Iran in the list. He will be back to us later in the week after he has met with the Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 leadership in Tehran. In discussing what we could do for them he raised the issues of 2M homeless in Iran, the collapse of the economy and the destruction of their oil industry. He complained bitterly about the French effort this spring which he said was designed only to get their hostages out and to help Chirac get elected. We noted that RR could not be reelected, that his motiva- tion was to bring about an honorable end to the killing in the Iran/Iraq war, and to reestablish a positive relationship with the Iranian government that would lead to Christians, Jews and Moslems living in peace with one another. On a number of occasions he was told that RR believed deeply in the teachings of our Holy Book, a copy of which was on the table, and ref- erence was made to a number of pertinent passages (e.g. Gen. 15:7-21; Gal. 3:7; etc.). At one point he noted to George that RR being a man of God had removed the only argument they had-that Allah was sup- posed to be on their side. He has promised prompt action on the hostages, is looking for assurances that we will not walk away once they use their influence to get them free and noted that the USG should stop other attempts to make contact w/ the GOI to prevent confusion within the fac- tions at home. He expressed several con- cerns about the [Ghorbanifar] channel and admitted that they believed someone close to [Ghorbanifar's Tehran contact] was working for the KGB. He expressed great concern that the Soviets could exploit con- firmation of the contact by making the con- tact public and doing great mischief in Iran and the U.S. and by rapidly escalating their assistance to Iraq or even intervening in Iran. We did all we could to feed this anxi- ety. Nir has been calling regularly to exhort us to move on the next shipment. Because [the Relative] has asked us to wait to see what the result of his discussion in Tehran is, we have decided to stall by tell- ing Nir and Gorba that we must have a meeting w/ [the official in the Prime Minis- ter's office] before we can proceed. We have told Nir that you and RR are very concerned about the two new hostages and that we cannot proceed w/ further deliv- eries until such a meeting takes place. [The Relative] has asked that for the time being we leave the Israelis out of this because of the problems at home. Contrary to what Nir said here, [the Relative] did know that Nir was an Israeli. We will put together a summary of the talks by . my return Wednesday. You can brief RR that we seem to be headed in a vy positive direc- tion on this matter and have hopes that the hostage resolution will lead to a significant role in ending the Iran/Iraq war. (North PROF note to Poindexter, 9/22/86, 9:22:57) In the course of the meetings, [the Relative] asked that the United States "stop other attempts to make contact [such as those through [third countries] now that we were in direct discussions." (North PROF note to Poin- dexter, 9/20/86, 12:06:57.) "Geo Cave will brief Casey this afternoon on the results of the discussions w/ [the Relative]," North wrote Poindexter. "Casey has asked what we are doing abt bringing Sec State up to speed on re- sults. I told him this was your call. Casey is urging a mtg on Weds. among you, Casey, Cave and me to discuss situation prior to dis- cussion w/Shultz. Can we schedule same?" (North PROF note to Poindexter, 9/22/86, 12:00:49) Apparently, the Director of Central Intelli- gence discussed the relative's visit with the Se- cetary of State. North wrote Poindexter the afternoon of September 22: FoMin Velayati is one of the few non-cler- ics at the top of the GOI. He is a techno- crat, reportedly a conservative and relative- ly close to Rafsanjhani [sic]. He reportedly is a member of the "War Council" which determines the distribution of resources and funds within the Iranian government. According to [the Relative], Velayati par- ticipated in the meetings regarding our earlier diplomatic approaches to the GOI and evaluated these initiatives as sincere. [The Relative] reports, however, that Ve- layati was not in the final sessions they had which authorized [the Relative] trip to the U.S. In these sessions Rafsanjhani, Moshen [sic] Rafiq-Dust and Mohammad Hosein Ja- lalai along with Musavi-Khamenei made the decision for him to come to the U.S. and to be assured that he was indeed talk- and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 - Declassified Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ing to the top of the USG. Re the Casey/ Shultz discussions: Casey informs that he told Shultz, alone, that the CIA was assist- ing in bringing [the Relative] into and out of the U.S. for talks and that he (Casey) wd get back to Shultz at some point in the future on what had transpired. According to Bill, Shultz simply said "OK." (North PROF note to Poindexter,. 9/22/86, 14:35:55) North also prepared a full memorandum of conversation to Poindexter on September 25 which had additional material including the statement: "I want to tell you that unless one of the three men sitting here in the room right now (North, Secord, Sam O'Neill) contact you, there is no official message." North noted that "[t]he only other copy of this memorandum of conversation has been given (by hand) to the DDO of CIA." (North to Poindexter, 9/25/86) The Secretary of State told the Board that he heard nothing about Iran from July 2, 1986, when Under Secretary Armacost sent him a memorandum he does not recall reading and October 31, 1986, when, after making a speech in Los Angeles, someone asked him about a hostage release. "I was totally barn-sided. I had no idea what was taking place." (Shultz, SRB, 56-57) On September 24, North provided' Poin- dexter with materials for a meeting among Poindexter, the Director of Central Intelli- gence, Cave, and C/NE to discuss the Septem- ber 19-20 conversations. During the discussions, [the Relative] asked for a "discrete [sic] public sign" that he could use to support his debriefing back in Tehran. We decided that a VOA editori- al, broadcast in Farsi, which mentions the Iranian Government's denial of flight clear- ance to the hijacked Pan Am flight, would suffice. At Tab II is a VOA editorial re- garding the hijacking of Pan Am Flight #73. We appear to be in contact with the high- est levels of the Iranian Government. There is no doubt that [the relative] is far more competent and better "connected" than our other interlocutor, [the official in the Prime Minister's office]. It is possible that the Iranian Government may well be amenable to a U.S. role in ending the Iran- Iraq war. This, in and of itself, would be a major foreign policy success for the Presi- dent. We, therefore, need to determine how we will proceed from here on with the Iranians. Specifically: -Should we proceed with the "joint committee" proposed by [the Relative] during our discussions. -Who, if anybody, at the State De- partment should be brought into this activity. RECOMMENDATION That you review the attachments prior to your meeting. Approve "JP" Disapprove (North to Poindexter, 9/24/86) North attached Cave's summary of the meetings. ([Cave], "Rundown of Visitor's comments on 19/20 Sept 86," Tab I to North to Poindexter, 9/24/86) North also attached a draft of a Voice of America editorial entitled "International Coop- eration Against Terrorism," in which, as prom- ised to the Relative, Iran among others, was thanked for its assistance in the successful reso- lution of the PanAm Flight 73 hijacking. (Tab II to North to Poindexter, 9/24/86) 91 Cave recalled that, at the meetings on Sep- tember 19 and 20, "an enormous amount of progress was made. (Cave 17) Cave told the Board that "we were talking to someone at the political level, even though the gentleman was very young." (Id.) [W]hen we were in Tehran, at the political and strategic level, we really didn't get anywhere. But at this meeting [September 19-20], he proposed to us that we form a joint commission of four U.S. members and four Iranian members, that we meet in secret and come up with a program for im- proving U.S.-Iranian relations. 91 On September 25, after Craig Coy, a member of the NSC staff and former executive assistant to Admiral Holloway, Execu- tive Director of the Vice President's Task Force on Terrorism, spoke to Ambassador Bremer about the editorial, North sent the editorial to Bremer with instructions to broadcast it on Septem- ber 26 and 27. (North to Bremer, 9/25/86 Coy 3-4) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 He also discussed in great detail their con- cerns about Afghanistan, the Soviet Union, and the Persian Gulf. He told us that they had taken our advice and in early Septem- ber had sent their Oil Ministry [sic], under cover of doing OPEC business, on a trip around the Persian Gulf to talk to the Saudis, the Kuwaitis and the United Arab Emirates, and had gotten what they had considered a rather positive response, par- ticularly from the Saudis. At that meeting, we also gave them a brief- ing on what we considered to be the Soviet threat toward Iran. We also agreed at that meeting that at the next meeting they had, which was going to be in early October, we would give them a briefing on our view of the war, their war with Iraq. We also gave them at the Sep- tember meeting a briefing on our view of how the insurrection in Afghanistan was going against the central government and the Soviets, and they promised at the next meeting that they would give us their views. (Id. at 18-19) To C/NE, this meeting had been remarkable for another reason. He told the Board that [the Relative] immediately presented bona fides in the sense of saying, look, we can't get all your hostages out. It was the first time we had heard that in this channel. Always before the promise was don't worry about a thing; we can get them all. He said, we can get two out, maybe three, but we can't get them all. (C/HE (1) 38) According to Charles Allen, the "new channel" informed the Americans in Sep- tember that Khomeini's son "briefed the father in great detail . . . [and] the Iranians had de- cided that it was worth talking to the Americans not just for arms but, I think, for broader rea- sons." (C. Allen (1) 19-20) C. Frankfurt In the immediate aftermath of [the Rela- tive's] visit, events seemed to move quickly. North wrote Poindexter on September 26 that [t]his morning, immediately after the VOA broadcast of our PA-73 message, [the Rela- tive] deposited $7M in the numbered Swiss Account we gave him last week. The money will be transferred by noon (EDT) to another account in another bank. In order to save time, I have told Dick to pay CIA's account for the remaining HAWK parts and the 500 TOWs so that they can be assempbled [sic], packed and moved to [location deleted]. UNODIR, CIA will com- mence acquisition as soon as they receive the money-though nothing will be shipped to final destination until we have had the follow-on discussion w/ [the Rela- tive] and reached an understanding on the "obstacle." We believe he will want to meet on the week of October 6-10-* * * . Nothing will move from . . . until you so approve. Will sit down tomorrow w/ the CIA logistics guy who is doing the order- ing to see if for once they can get it right. (North PROF note to Poindexter, 9/26/86, 09:47:48) A week later, North submitted the views of his team (Cave, Clarridge, C/NE, Secord, and North) on "Next Steps for Iran." They argued for the program discussed with [the Relative], who added pressure for acceptance. North reported on October 2: [The Relative] contacted Dick this morning and asked that George, Dick and I meet him on Monday in Frank- furt. He claims to have just returned to Tehran from Beirut and that he will have good news regarding the "obsta- cle" (hostages). I am preparing a paper for you which will include the travel approval for Goode and a bible for [the Relative]-since he is bringing a Koran for the President. We will also use the opportunity of this meeting to set Nir straight on how we are going to proceed. He is beside himself at the delay in action since he was here-and we can, I believe take care of that whole problem in the next few days. Will include our collective recommen- dations (from George, Dick and me) in the package. Hope to have it to you this afternoon. Warm regards, North Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 p.s. PLEASE authorize us to be poly- graphed re this Woodward mess. You, the President, WE need to find the person who is doing this. p.p.s. On the Costa Rican airstrip: it is a C-135K, not a C-130. We had to sell the C-130 last month just to keep Project De- mocracy afloat (actually an L-100, the commercial variant of the C-130). The airplane in the photo-and referenced in the memo is a smaller precedent to the C-130 w/ 2 reciprocating piston engines and two ram jets outboard (like the old P2V Neptunes). (North PROF note to Poindexter, 10/02/86, 15:11:48.) A week later, North submitted "Next Steps for Iran" to Poindexter. [The Relative] called Dick this morning to advise that he had just returned from Beirut and would very much like to meet .with us in Frankfurt, Germany, on Monday, October 6. He indicates that he has "good news" regarding the hostages and that he wishes to get past the "obstacle" as quickly as possible. An appropriate travel approval is attached at Tab I. George Cave is taking a well-deserved "mini-vacation" in Rome. We are telling all callers that he is in the hospital for tests on his back. In accord with [the Relative] request, the U.S. side would be represent- ed by: Sam O'Neil, Copp, and Goode. This meeting also affords us the opportu- nity to deal with the issue of Israeli coop- eration. Nir has been calling daily (often several times) urging that we get on with the process in our "joint venture." He con- stantly cites his September 10 meeting with you as the basis for proceeding urgently. Because we have not told him about our intention to pursue the "[the Relative channel]" first, he continues to encourage Ghorbanifar to raise the requisite funds for another delivery. Ghorbanifar, in turn, has a frequent dialogue with [his Tehran con- tact] in this regard. All of this tends to create confusion among the various partici- pants and an unnecessary OPSEC vulner- ability. We need to act now to reduce the number of channels into the Iranians (at least on a temporary basis) and clarify vari- ous roles and missions. As is evident on the diagram at Tab II, the various channels of communications are, at the very least, a source of great vulnerability to KGB and other SIGINT-penetration. We (Cave, Clarridge, C/NE, and Copp) be- lieve that we should move promptly on both fronts as follows: -[The Relative]: O'Neil, Copp, and Goode meet with [the Relative] in Frankfurt on Monday, October 6. [The Relative] has indicated that he has an internal consensus on how to proceed with regard to the hostages "obsta- cle." He has said that he will bring with him to this meeting "one of the officials we met with in Tehran" and has asked that we bring with us a de- finitive sample of the intelligence we had discussed when he was here. Based on this, we believe that [a Revo- lutionary Guard Intelligence official], may well accompany [the Relative]. You will recall that [the Relative's] re- quest for intelligence was very specific (the details were forwarded to you via PROFs). While the sensitivity of pro- viding this information is well-recog- nized, it must also be noted that intel- ligence was given a higher priority by [the Relative] than any other assist- ance we could provide. In the Casey- C/NE-Cave-North meeting we had with you after [the Relative] departed, we all agreed that it was unlikely that providing such information would change the course of the war. Further, we all recognized that the information need not be accurate and that it was highly perishable given the dynamic nature of the conflict. In short, we be- lieve that a mix of factual and bogus information can be provided at this meeting which will satisfy their con- cerns about "good faith" and that we can use the "perishible" argument as an incentive for the Iranians to accept a CIA communications team in Tehran. As before, we would not leave any documents with the Iranians, but will provide an exposition during Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 which they could take detailed notes. Director Casey needs to be told to prepare the intelligence for handcarry to the meeting. [The Relative] has said he is bringing a Koran for the President. As a recip- rocal gesture, we have purchased a Bible which we would present to [the Relative] for him to take back to Tehran with him. Given our earlier discussions (see transcript), it would be very helpful if the President would inscribe a brief note citing a particular biblical passage (Tab III) in the front of the Bible. This particular excerpt is important in that it is a new testament reference to Abraham, who is viewed by Moslems, Jews, and Christians as the progenitor of all the world's na- tions. It would be most effective if the President hand wrote the inscription and initialed/signed it without ad- dressing the note to any particular person. -Nir: When Amiram was here, we made a conscious decision not to ap- prise him of our near-term efforts with [the Relative]. We did inform him ear- lier of the contact and he continues to inquire regarding the status of this ini- tiative. Meanwhile, lacking guidance to the contrary, Nir has sought to stimu- late further activity between Ghorbani- far and [the official in the Prime Minis- ter's office]. This has resulted in [this official] calling directly to George's home and office several times daily and considerable confusion regarding why we have not accepted the [Iranian official]/Ghorbanifar "offer" to pur- chase the remaining HAWK spare parts and 500 TOWs. From an operational perspective, the current communications arrangements are a command and control/OPSEC nightmare (Tab II). Nir essentially controls our access to both [the Irani- an official] and Ghorbanifar and, thus, we often find ourselves reacting to his well intentioned efforts. We believe that we now have an opportunity to change the relationship in such a way that Nir is placed in a supporting role rather than acting as a primary source of control. We also recognize that Is- rael's participation in this activity is both politically and operationally im- portant. In altering Nir's status, we need to do so in such a way that he and those officials in his government who are cognizant continue to per- ceive that this is still a "joint venture." In order to accomplish the objectives outlined above, we propose that on Saturday, October 4, Copp would fly to Tel Aviv and meet with Nir. At the. meeting, Copp would use the talking points at Tab IV. In an effort to ame- liorate Nir's angst over his "new status," we urge that the letter at Tab V to Prime Minister Peres be signed by the President. If you agree, we need your approval of the talking points at Tab IV and a Presidential signature (real or autopen) on Tab V by 3:00 p.m. Friday, October 3. The steps above are designed to give us a chance to make the new relationship through [the Relative] function without de- stroying the Ghorbanifar/[Iranian official] channel. We would, in effect, put Ghorban- ifar [the Iranian official in the Prime Minis- ter's office] on "hold" until we see what [the Relative] produces. Please note that when Copp briefs Nir in Tel Aviv on Satur- day, he will not reveal that he is enroute to Frankfurt to meet [the Relative]. Given [the Relative's] strong antipathy toward the Is- raelis and our uncertainty as to whether or not he knows that Nir (aka.Miller) is Israe- li, we would tell Nir on Sunday night that we were going to a hastily arranged meet- ing with [the Relative] which he (Nir) will be unable to make due to a lack of con- necting flights to Frankfurt. [The Relative] has already told us, that shortly after the October 6 meeting, there will be a follow-on meeting. of the "joint committee" in which [the official in the Prime Minister's office] will be a partici- pant. Unless we are convinced that the Ira- nians would recognize Nir as an Israeli, we Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 would intend to invite Nir to this follow-on meeting. A memo from you to the President has not been prepared for obvious reasons. It is hoped that between now and 3:00 p.m. Friday you will have an opportunity to pri- vately discuss this with the President and obtain his approvals/signatures on the steps indicated above. (North to Poindexter, 10/2/86) Poindexter ap- proved North's travel request (in the name of William P. Goode); agreed to have the Presi- dent inscribe a Bible with the designated pas- sage from Galatians;92 approved talking points for Secord; and agreed to persuade the Presi- dent to sign the letter to Peres. Poindexter nei- ther accepted nor rejected the request to have the Director of Central Intelligence prepare an appropriate intelligence package by October 4 for the meeting on October 6. (Id.) The second attachment to this memorandum was a diagram of the communications between "Tango" [Tehran]-Merchant (Ghorbanifar), [the official in the Prime Minister's office], [the relative], [the Iranian expatriate] and [Secord's Iranian agent].-and the United States team- Goode (North), Sam (Cave), Charlie (Allen), Copp (Secord), and C/NE. Apart from Cave and [the official in the Iranian Prime Minister's office], who sporadically communicated one-on- one, and Allen and Ghorbanifar, who also com- municated directly, the others talked through middlemen. Ghorbanifar generally used Nir; while those in the second channel used Hakim (Abe). (Id. at Tab II) North added the recom- mendation: Pare the U.S. communicators down to no more than two individuals (who either com- pare notes directly each day, or report to a common supervisor); e.g., Sam and Copp, who both report daily to North. Cut Char- lie, C/NE and anybody else out. Have them stop communications cold turkey (to sup- 92 "'And the Scripture, forseeing that God would justify the Gentiles by faith, preached the gospel beforehand to Abraham, saying, 'All the nations shall be blessed in you'. Galatians 3:8' Ronald Reagan Oct. 3, 1986" The President told the Board that he did inscribe the Bible because VADM Poindexter told him this was a favorite passage with one of the people with whom the U.S. was dealing in Iran. The President said he made the inscription to show the recipient that he was "getting through." port cover story of [old] channel being blown, rolled up, and finished). (Id.) Secord's instructions for his meeting with Nir on October 4 noted: The objective of this discussion is to im- prove our control of events in this joint effort to establish a strategic relationship with Iran. The talking points below are in- tended to establish the parameters of your discussion and are designed to elicit fur- ther cooperation: -ADM Poindexter has directed that I see you regarding our current Ghor- banifar/[Iranian official] channel and discuss with you ways' in which we can move together to accomplish our mutual objective-a strategic relation- ship with Iran. -We have fairly strong evidence that [the Iranian official] was directly in- volved with the seizure of the second new hostage in Beirut (Cicippio). -We believe that the first new hos- tage (Reed) was taken by elements other than Hizballah-although they may have him in their hands now. -We think that [the official in the Ira- nian Prime Minister's office] may have believed that he could bring additional pressure to bear on us to commence further deliveries by seizing another hostage (or hostages). -Quite the contrary is true. The President is adamant that we will not move forward on this channel until we resolve the new hostage issue. -We are also concerned that the two new hostages (or at least Cicippio) represents a clear violation of the "un- derstanding" we have had with the Iranians on anti-U.S. terrorism since June of last year. -We do not want to engage in a process that results in new hostages just to bring "pressure to bear." Nor will we continue this process if, when the current hostages are released, Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 more are taken, simply to elicit further deliveries of arms. -Aside from this very strong policy objection to continuing, we have, as you know, had repetitive financial and communications dufficulties [sic] with Ghorbanifar. While we could debate as to whether or not Ghorbanifar had re- ceived all that was due him by the Ira- nians, the most important factor is po- tential OPSEC risk. -In an effort to "keep things moving," Ghorbanifar has made com- mitments in our name which are pa- tently beyond our ability to meet. This has resulted in increased expectations on the part of the Iranians. -We know * * * that neither [the of- ficial in the Prime Minister's office] nor other Iranian officials in Tehran trust Ghorbanifar. -Finally, both of us know that [the Iranian official], himself, is not intel- lectually astute enough to realize the importance of our contact nor the sin- cerity of our desire to establish an offi- cial government-to-government rela- tionship. -In short, this channel is not serving our mutual objective: the reopening of a strategic relationship with Iran. -The President has directed that we will not proceed with any further re- ceipt of funds from Ghorbanifar nor deliveries to [his Tehran contact] until we resolve these issues. -Several months ago, I apprised you of a contact with [the relation of a powerful Iranian official]. The USG decided to pursue this contact to de- termine its validity. -We are confident that [the Relative], the man I met with in Brussels, has been franchised to act as a liaison be- tween the U.S. and Iranian govern- ments. -When Prime Minister Peres was in Washington last month, the President assured him that we are going to con- tinue this effort as a joint project. [Poindexter penned a questionmark in the margin next to this point.] -I have been instructed to seek out a second meeting with [the Relative] as soon as it can be set up and that I will act as the U.S. intermediary until we establish direct contact with govern- ment officials from our side. -Once we have established direct USG contact with [the Relative], we intend to introduce you into this proc- ess under the same conditions as ob- tained when you went to Tehran with -Based on my initial meeting with [the Relative] and the intelligence we have been able to collect, we believe that this contact may well prove to be the one that both your government and mine have been seeking. (Remember Nir has been told that you "came upon" [the Relative] as a conse- quence of looking into the possible diver- sion of TOWs through Spain/Portugal during an investigation undertaken in late July/early August.) -While we explore the sincerity of the nephew and confirm his ability to speak for the Iranian government, we want to keep the Ghorbanifar/[Iranian official] channel on "hold." -To that end, we have told Sam- who is in the hospital-he is to contact [the Iranian official] and tell him that: -there must be a meeting with [the Iranian official] before we proceed any further; -the issue of the two new hos- tages has become a strong, nega- tive factor in proceeding at all; Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 -this matter (the two new hos- tages) must be resolved before we will take any further steps for any further deliveries; -the problem is not the merchant and his financing, but rather the two new hostages; -contrary to what he [the Iranian official] may expect, there will be no further deliveries until we have met and resolved this matter; -we have asked [the Iranian offi- cial] to meet with us in Frankfurt on October 9-we do not yet have an answer. -I intend to meet with [the Relative], somewhere in Europe or Turkey, hopefully this week. I will then report back to Washington on my findings and a follow-on meeting will be set- up-in which we will attempt to have you included. -I want to caution you, however, that in my meeting in Brussels [the Rela- tive] indicated that he and others in Tehran are aware that you are an Is- raeli-and knew it when you went to Tehran. -Neither of us want this contact, if it is indeed what I think it to be, to founder because of this. -I have been instructed to find a way to have you in the meeting in which Goode and Sam will serve as the USG representatives. -If the meeting with [the Relative] this week goes well, I would expect that all of us could meet with him next week. -In the interim, if [the Iranian offi- cial] does indeed agree to meet with us under the conditions we have estab- lished, we should proceed with that meeting. Poindexter met with the Director of Central Intelligence and his Deputy the evening of Oc- tober 2. (DCI Telephone Calls and Meetings; Gates, Memorandum for the Record, 10/3/86) In addition to discussing the proposal to pro- vide Iran with military information ... Both North and Poindexter reported on the new channel to McFarlane. On October 3, North invited McFarlane to review the tran- scripts of the September 19-20 meeting. (North PROF note to McFarlane, 10/03/86, 22:08:16) Poindexter expressed enthusiasm about the meetings: We have made contact with [the Relative of a powerful Iranian official (the "Rela- tive")]. Two meetings so far. One here in US. Ollie, Cave and Secord meet with him this weekend. in Frankfort [sic]. Your trip to Tehran paid off. You did get through to the top. They are playing our line back to us. They are worried about Soviets, Af- ghanistan and their economoy [sic]. They realize the hostages are obstacle to any productive relationship with us. They want to remove the obstacle. [The Relative] has been in Beirut, says he has good news for Frankfort. We shall see. Still insisting on group release. If this comes off may ask you to do second round after hostages are back. Keep your fingers crossed. (Poindexter PROF note to McFarlane, 10/03/ 86, 20:35:35) McFarlane responded: Roger; anytime John. By the way, I watched the news tonight and saw Peggy Say beating up on the Ad- ministration for not getting the Beirut hos- tages out. I haven't heard anything on that score for a while. But I get [sic] the sense that we are pretty much at the mercy of the Iranians. If you think it would be of any value, I might be able to take a couple of months off and work on the problem. No guaran- tees and no need for any sponsorship (except for airfares and hotels) but I might be able to turn something up. Think about it. (McFarlane PROF note to Poindexter, (10/04/ 86) B-165 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 On October 5, North flew to Frankfurt. On the 10th, he reported to Poindexter: 93 Copp has just returned from Frankfurt. Ac- cording to both he [sic] and Sam, my 98 The day North left, an aircraft with Eugene Hasenfus aboard, crashed in Nicaragua. Robert Earl, who shared an office with North, reported to Poindexter: "[O]ne of the Democracy Inc aircraft apparently went down on a resupply mission to FDN forces in the north. It is overdue from its mission, and no radio contact was received. It is currently un- known where or why the aircraft went down, but [third country] assets are discreetly organizing a SAR effort over international waters & friendly territory portions of the route. Three Ameri- cans and one Nicaraguan national aboard. I will keep you advised of details as I get them." (Earl PROF note to Poindexter, 10/06/86, 11:49:16) William Perry, an NSC staff member who worked on Latin America, wrote Poindexter on October 7: Plane down in Nicaragua and survivor of crash had no USG connection according to CIA and DIA. This tracks with Elliott's denial and has been passed on to Dan Howard. FYI, and not for release, the flight originated in El Salvador and is probably tied in with private U.S. assistance to the Con- tras. Survivor could testify to this type of connection... . (Perry PROF note to Poindexter, 10/7/86, 12:42) North wrote McFarlane on October 12: We urgently need to find a high powered lawyer and benefac- tor who can raise a legal defense for Hassenfus [sic] in Mana- gua. If we can find such persons we can not only hold Gene and Sally Hassenfus together (i.e., on our side, not pawns of the Sandinista propaganda machine) but can make some signif- icant headway of our own in counter-attacking in the media. Obviously, there is the added benefit of being able to do some- thing substantive in the legal system to defend this young man. I know that this is a tall order and that many U.S. lawyers will not want to step up to this task, but for the man (or woman) who does, there will be a fair bite of history made in the next few weeks. There will, no doubt, be a show trial of some kind launched and unless we have an overt, competent legal de- fense, Hassenfus will become nothing but a tool in their hands-none of which is in our interests, or his. By Tuesday, a Swiss lawyer, retained by Corporate Air Services, should be in Managua. We should not rely on this person to represent the whole case since he is supported by covert means. We would be far better off if we had an overt mechanism here in the States which represented USG/Hassenfus' interests, and who would not have to respond to questions regarding the origins of Corporate Air Services, Inc. (CASI), or its other ongoing ac- tivities. The CASI lawyer is being instructed to cooperate fully w/ this U.S. Attorney, whoever he/she may be. Have also locat- ed approx. $100K from a donor who does not care if this con- tribution becomes known (though the donor has done things in the past to keep CASI in operation-a fact which need not become known). Can you help? If need be, I can meet w/ you/ others tomorrow or Tues. [October 13 or 14] Believe this to be a matter of great urgency to hold things together. Unfortu- nately RR was briefed that this plan was being contemplated before he left. for Iceland and am concerned that along about Wednesday when people begin to think of things other than meetings in cold places, he will remember this and nothing will have been done. Any thoughts wd be much appreciated. Elliott Abrams willing to sit-in any time after Yom Kippur fast is fin- ished tomorrow night. Pls Advise. (North PROF note to McFarlane, 10/12/86, 16:33:11) donkey act with the Relative and [a Revo- lutionary Guard Intelligence Official] had quite an effect. [The Revolutionary Guard Intelligence Official] told Dick that if he re- turned home without the hope of further help that he "would be sent back to the front." [The Revolutionary Guard Intelli- gence Official] gave Dick a proposal closer to the line in my original seven points and asked Dick if there was any way that he could get us to meet before the 3 Nov. meeting I had suggested. Dick told him that he would pass the points on but could not guarantee anything. Points as follows: 1. They pay $3.6M next week. 2. We deliver 500 TOWs (no HAWK parts) 9 daysafter [sic] payment. 4. Two hostages (if possible, but no less than one) released w/in 4 days of TOW delivery. If only one hostage released, whole process stops and we meet again. 5. Repeat funding and Delivery [sic] cycle as in steps 1 & 2 above. 6. We send Tech support for HAWKs, update on intel and secure comm team to Tehran and provide location/availability or artillery items noted on the original list provided by [the Relative] in Washington mtg. 7. Iran does utmost to secure release of re- maining hostages(s). [The Revolutionary Guard Intelligence Of- ficial] told both Sam and Copp that the group holding Reed and Cicippio is not, repeat not, responsive to Iran. Further, that only [Hostage 1] and [Hostage 2] are "immediately available." [The Revolution- ary Guard Intelligence Official] begged Dick to let them find out exactly where [Hostage 3] is and "you can rescue him and not ruin us (Iran) with the Hizballah." Both Sam and Copp believe we should let them stew in Tehran for a few more days and then accept the proposal indicated above. [The Revolutionary Guard Intelli- gence Official] and [the Relative] both said that Pattis was not now available, but that B-166 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 they were sure they could work it out once things were moving. Only changes from my proposal is sequential nature of their plan and lack of mention of Buckley body & transcript of interrogation. We do not believe that they can be sure of getting all three-all available info indicates [Hostage 3] is held elsewhere. Dick and Sam believe that we will, however, get two back for nothing more than the two sets of 500 TOWs. They point out that the rest of what the Iranians want (a plan for ap- proaching the Kuwaitis, the location/avail- ability of the artillery, and the intel) all can be managed w/o any great complications. [C/NE], Cave and Casey all seem to be convinced that this is best/fastest way to get two more out-probably w/in next 14 days. [C/NE] also notes that the situation in Leb is getting much worse and that we may be getting close to the end of the line for any further movement. Finally, all here now believe that these guys do not have Reed/Cicippio, who are probably in hands of Libyan controlled group which earlier bought/killed Kilburn. [C/NE] and Sam believe that these guys may be the only way we can ever get our hands on Reed/ Cicippio since their access and info in the Lebanon are so much better than ours. BOTTOM LINE: Recommend that we wait for their call on Tuesday, if their position is same as above or better, we slid push them to include Buckley remains and tran- script and then get on with it. Pls advise. (North PROF note to Poindexter, 10/10/86, 21:55:31) Cave told the Board that the most important part of the Frankfurt meeting was the Iranian's statement that he could obtain the release of one hostage. In addition, Cave said, the partici- pants discussed Iran's weapons requirements, the Afghan war, and the Iraq war. Cave re- called that he gave them a briefing on our view of their war with Iraq. This briefing was structured so that we told them basically the truth, but the stress we placed on the briefing was such that it would give them consider- able pause about launching this final offen- sive that they had been talking about for the last six months. (Cave 19-20) Cave recalled that the Iranians wanted to end the war in a way they could present as a victory. (Id. at 20) The negotiators agreed to meet again toward the end of the month. During that meeting, Cave said, "we caused the 500 TOWs to be shipped. . . . That's when we gotJacobson [sic] out." (Id. at 21) As it happened the Israelis shipped the TOWs because Secord tried to deposit the Ira- nians' payment for the weapons into a CIA ac- count that had already been closed. D. Arms Into Iran, One Hostage Out of Lebanon 94 North returned from Frankfurt the evening of October 8. (North calendar) By that time, "The NSC staff chronologies tell the following tale for the summer and fall of 1986 (Maximum Version 9; Historical Chro- nology 13-14. Where the Historical Chronology differs from the Maximum Version, this fact is indicated by square brackets.): Through August, September, and October 1986, numerous ad- ditional meetings were held in Europe between U.S. represent- atives and the new and Iranian contacts [sic]. During the Octo- ber 26, 1986 meeting in Frankfurt, Germany, the U.S. side, as in the past, insisted that the release of the hostages was a pre- requisite to any progress. [The Relative] urged that we take a more active role in support for the Afghan resistance . . . The Iranians also proffered, and the U.S. accepted, the offer of a Soviet T-72 tank captured from Iraq. [The Iranians have also offered to provide a copy of the 400 page interrogation of Wil- liam Buckley.] At this meeting, [the Relative] stated that there was a "very good chance that another American or two would be [f]reed soon." On October 29, with U.S. acquiescence, Israel provided Iran with an additional increment (500 TOW missiles) of these defensive weapons. [On October 29, with U.S. acquiescence, Israel provided Iran with an additional in- crement of defensive weapons (500 TOW missiles).] Late on October 31, [the Relative] called the U.S. citizen (Hakim) tasked to maintain contact and advised that Iran had "exercised its influence with the Lebanese" in order to obtain the release of American-David Jacobsen-and an uncertain number of French hostages. He further noted that this was part of the purpose of the Iranian Foreign Minister's visit to Syria. [The Relative] stated that the situation in Tehran, as well as Iranian influence over Hizballah were both deteriorating; .. . On November 2, David Jacobsen was driven to a point near the old American Embassy compound in West Beirut. The U.S Embassy in East Beirut immediately dispatched an embassy of- ficer to west Beirut to pick up Mr. Jacobsen. This operation is about to spin out of control from an operational security point of view, and I will say right now-and I've said it to the Con- gress in depth-my concerns were not on illegal diversion of funds to the contras. That was about the farthest from my mind. Here was an intiative that had been going on for about 14 months and was about to spin out of control, and no one seemed to be realizing what was occurring. B-167 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 the first signs of the operation's demise had oc- curred. But the secret drama had another scene to play before it became a public scandal. Charles Allen told the Board: I was very troubled in September that the operation was to spin out of control, and I became convinced, without any evi- dence, but I've been trained all my life as an intelligence officer to make assessments, that perhaps because Secord and Hakim were directly involved and were also direct- ly involved in supplying the contras, and I could not understand this incredible price markup that we were seeing-the com- plaints were coming from Iran, from Ghor- banifar, from the Special Assistant to the Prime Minister of Israel, although later he didn't raise that issue again, and I think perhaps-it's just speculation-he was ad- vised by the NSC that maybe some of the money was being diverted to the contras. On 1 October I went to Bob Gates, the Deputy Director, and I said, I am deeply concerned that: And I added at the end of my conver- sation, I said, and this first channel that has been shut down by the NSC is a running sore. The creditors are de- manding payment and I said this is going to be exposed if something isn't done. I said perhaps the money has been diverted to the contras, and I said I can't prove it. Gates was deeply disturbed by that and asked me to brief the Director. For one reason or the other, I did not talk to the Director of Central Intelli- gence until 7 October. I raised that issue at that time about the operation- al security of the problem. I also raised the issue of diversion to the contras, and Mr. Casey at that stage said Mr. Furmark has just talked to me, and he didn't talk about the con- tras, but he talked about the problems of the Canadian investors, and that they are threatening to take law suits to try to take some action. I said to Mr. Casey, I think I should put all my troubles down in a memo- randum, and he said that would be good, and on Columbus Day, October 13, I laid out a comprehensive memo- randum which laid out what I thought were the original objectives of the NSC initiative-to open up a geo- strategic relationship in the long term with Iran, to get the hostage situation out of the way as a stumbling block to any further relations with Iran, and to discourage Iran from conducting ter- rorism. And throughout this initiative Colonel North constantly reiterated to the Ira- nians no more terrorism against Amer- icans. And in fact terrorism against western targets and against Americans have been substantially reduced since 1984. I presented this memorandum to Mr. Gates on the 14th because I wasn't certain what he wanted. I gave three recommendations--that we immediate- ly set up a planning cell in the NSC headed by an individual like Henry Kissinger, Hal Saunders, Dick Helms- I forgot who else-to really take a hard program review of this whole ini- tiative. What are we trying to achieve? What are our short-term objectives? What are our long-term objectives? What are our options? A critical review of everything. And I said this is the first recommendation. The second recommendation was to get ready for exposure of this initia- tive. We don't even have press guid- ance. We ought to start preparing some. And to get together a group that's familiar with the Ghorbanifar channel and decide how best we can shut it down in an orderly system-like fashion. The Director was taken by this memo- randum, and he took the original, called Poindexter and said I must see Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 - - Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 you right away. And he and Gates jointly met with Poindexter on the 15th. They presented the memoran- dum. They talked in considerable detail about it. Poindexter read it care- fully in their presence, asked who wrote it. I have known John Poin- dexter for several years and I admire him greatly. And they said Charlie Allen wrote it, and Admiral Poindexter promised to look into it. And Bill Casey told me that he advised Admiral Poindexter to get a White House counsel involved right away because it contained in the memorandum that there would be allegations of impro- priety and shabby conduct by U.S. offi- cials, regardless of how this comes out, if this was publicly exposed. And at this meeting the Director and Bob Gates called me in after they had returned from seeing Admiral Poin- dexter and Director Casey asked me to see Roy Furmark again. I saw Roy Fur- mark on the 16th. I got additional in- formation. I wrote another memoran- dum on October 17 which I laid out how deeply troubled I was because I could see this thing blowing up and we were going to have an incredible mess on our hands. I told Mr. Furmark I needed to sit a long time with him and debrief him fully, and I was to see him early-I guess it was about the week of the 20th of October-but it was the 22nd before we could get together in New York. I took George Cave with me, and at that stage Mr. Furmark made an allegation that he had been told by Ghorbanifar that the bulk of the $15 million that had been raised by the Canadian investors and the Arab in- vestor, which Khashoggi had guaran- teed, would be repaid within 30 days at 20 percent interest that the bulk of that money had gone to the contras in Central America. I recorded all this in a memorandum. Mr. Cave and I jointly prepared the memorandum. It went to Mr. Casey. Mr. Casey again was deeply disturbed. He talked to Admiral Poindexter on secure [telephone]. For some reason, the memorandum from Casey to Poin- dexter was never sent. It fell into the wrong out box. Casey, when this whole thing erupted on the 25th of November, he was deeply upset to find out he had not signed it. He thought it had gone to Admiral Poindexter. But it laid it out starkly that there would be allegations, that Ghorbanifar had made allegations of diversion of funds to the contras. Chairman Tower: And that was Octo- ber 17 that that memorandum was dated? Mr. Allen. It was never dated because he [Casey] didn't sign it, but it was October 24-the 23rd of October. I came back and Mr. Cave and I briefed Casey at 9:00 on the 23rd. We told him the whole thing. Mr Casey was deeply upset and said immediately prepare that memo. For some reason, the memo was never sent, but he talked to Admiral Poindexter again. Chairman Tower: What occurs to me is that anything that critical, that im- portant, he would have dicussed with Admiral Poindexter. Mr. Allen: He did, and he discussed this whole problem on the 7th. He dis- cussed it in depth with Admiral Poin- dexter on the 15th, when he said you better get your White House counsel involved immediately. Chairman Tower: And he was never aware that Poindexter had not gotten the memo? Mr. Allen: Not until the 25th of No- vember, when Mr. Casey asked me to pull all the memos together, and he said I sent that memo down and I also Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 talked to him on the 24th of October is actually the date it finally got into his in box. But he found out he had not sent it. He was deeply disturbed and upset. As a matter of fact, on the 7th of October he had called Admiral Poindexter. He had met with Admiral Poindexter, along with Mr. Gates, on the 15th. He had also talked to Admi- ral Poindexter on the 24th about this. He had given a lot of warning to Ad- miral Poindexter that this operation was spinning out of control. I later met with Mr. Furmark on the 7th of November, but at that stage the operation was starting to be exposed in a major way, so the fact that the Ca- nadian investors were threatening a law suit didn't seem to be as signifi- cant to me at that stage. [The article appeared in the Lebanese paper on the] 3rd of November, and Rafsanjani on the 4th made his state- ment that McFarlane came uninvited and we locked them up for five days, which was not true, but Mr. Rafsanjani was covering his derriere just a little on that. I guess my only comments on this was that the new channel that was opened in mid-August, I had some doubts about it initially, but it's turned out to be a very solid channel, that the initia- tive today is in the hands of the De- partment of State. (C. Allen (1) 29-35) Furmark told the Board that, on October 7, he met the Director of Cen- tral Intelligence in Washington, and explained that "the Canadians were putting lots of pres- sure on Adrian [Khashoggi], and that they were going to sue him and he would have to then bring in [sic] the U.S. into the transaction." (Furmark 10) At the same time the financiers of the arms transfers were pressing, allegedly, to recover their investment, the NSC staff and the CIA prepared to make another shipment of arms to Iran. On October 16, Earl reported a call from chief of the Iran desk at the Agency: The fool's [sic] want to get Nir to grease the skids in advance on their request for flight clearance to Tel Aviv before they submit the paperwork. I've got the info when you're ready to let Nir know. . . . I recommend you DON't [sic] tell him the flight plan data when you first tell him the thing is approved, however; it's so detailed he'll know we held out on him. Suggest you tell him I'm working w/ the fool's now to develop that info and we'll pass it to him as soon as we have it. Then we can call him again later tonight or tomorrow. New subject: The fool's are leaning for- ward as far as they can-e.g. the toes [sic] are apparently being palletized in Alabama already-but they can't get everything going until they have the money ($2.037m) in hand. They've asked for a heads up when Copp/Abe deposit it in their Berne account. I've codedup [sic] this request for a heads up/confirmation and sent it to Bob M. U. Robert McBrien] and [encryption device]. (Earl PROF note to North,95 10/16/86, 17:42:53) Coy reported to Earl on the 20th that the chief of the Iran desk had relayed informa- tion about 12 pallets, each carrying 44 TOWs. "Material [TOWs and medicine] is put together and will be shipped from AL when money is avail. Planning delivery to Adam [Nir] in T.A. [Tel Aviv] on Oct 29. (Coy PROF note to Earl, 10/20/86, 11:59:29) On October 21, 1986, Edward Tracy, a booksalesman, was kidnapped in Beirut. While preparations for another shipment of TOWs continued, North and his team went to 95 McFarlane again expressed concern about North. He wrote Poindexter on October 10: "At some point I would like to raise Ollie's situation with you. I really think he has become every Democrat's best target and as hard as it would be to lose him, it will serve your and his long term interest to send him back to the Corps". (McFarlane PROF note to Poindexter, 10/10/86, 15:10:42) Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643RO01300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Frankfurt for another meeting with the Rela- tive. North left Washington on October 26. (North Calendar) On October 29, Earl relayed a report from North to Poindexter: Gist of following message already given to you by phone on the plane, but thought you may need some of the details: For JMP from North. Iranian rep [the Rela- tive] assures us we will get 2 of the 3 US hostages held by Hizballah in next few days-probably Fri or Sat but NLT Sunday. To ensure good coordination w/ all concerned, propose North, [and] Secord ... proceed ASAP to Beirut to co- ordinate release of two hostages. If ap- proved, we wd proceed from Frankfurt to Larnaca via charter jet then to Beirut via US military helo to brief our ambassador. . .. Neither Secord nor North wd be visible but wd brief Amb Kelly on details. Secord wd attend because he will have to brief Amb on third hostage as well as remaining three (ie total of 4 Americans) when we get info from Rafsanjani on locations, slid we decide to proceed on a rescue msn when Iranians give us locational info. Press guid- ance for a Presidential announcement of the release before if becomes known will be developed along lines of quote The USG is grateful to all those who have as- sisted in this effort-and that two more AMCITS have been released unquote. Our effort is to have RR make the announce- ment before CNN knows it has happened, but after the AMCITS are in USG hands, so that RR is seen to have influenced the action and Syrians are not.... (Earl PROF note to Poindexter, 10/29/86, 22:23:43) North's account to Poindexter omitted the extensive discussion about the third American hostage and what could be done to secure his freedom. North told the Relative that he had already found a technician to work with the Ira- nians on their HAWK systems, but Secord added that it would be "highly unlikely that we would be allowed to send technicians into Iran, to Isfahan, until we get that guy out." The Rel- ative replied that Rafsanjani "has been taken with the subject of the Phoenix [air to air mis- sile]," and that if the Iranians "could just get a couple of these things working, and if it would hit an . . . Iraqi plane . . . it would be a terri- ble blow to [Iraqi] morale. . . ." The Relative promised that, if the U.S. would send a techni- cian to help with the Phoenix missiles Iran al- ready had, he would "personally get the third guy out, and . . . could tell [the U.S.] where the rest of the guys [three most recent U.S. hostages] are." North promised the technician, planning to send him in at the same time as the additional HAWK parts. Responding to the Ira- nian's question on the next delivery of 500 TOW missiles, North answered: "If you get the hostages out, we'll send you a million of them. All you have to do is pay for them. And if you guys get your act together, we'd open up an FMS account and you'd get a better price on them." Jacobsen was released November 2. North kept hoping others would be released if the story could be kept quiet for a few days. (Coy PROF note to Poindexter, 11/02/86, 4:25:06) It was not to be. The day after a Beirut magazine published an account of the May trip to Tehran, Teicher wrote Poindexter: The reports of Bud's trip in pro-Syrian Lebanese newspapers coming on the heels of high-level Iranian visits to Damascus, are the clearest possible signals we could receive that the succession struggle is un- derway and U.S.-Iranian relations are likely to play an important role in the struggle. Obviously there are many possible inter- pretations of the story; maybe it was putout by Mugniyas to embarrass Iran for putting so much pressure on him. We may never know the exact reason, but we must not let this opportunity to assess the con- sequences in Iran of these revelations from slipping through our fingers. I think it would be useful to produce an assessment of the range of possible interpretation, and possible U.S. options. To be fair, I also think it would be appropriate to involve B-171 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Dennis Ross. He is unaware of the com- partment or our activities. Once we finish the analysis, I strongly urge you to discuss our options with Shultz and Casey. At a minimum, we need to determine how best, other than parts, etc., to signal the Iranians in a productive manner. (Teicher PROF note to Poindexter, 11/04/86, 09:35, through Pearson (lower case in original)) On October 29, North had written Poin- dexter: "This is the damndest operation I have ever seen. Pls let me go on to other things. Wd very much like to give RR two hostages that he can take credit for and stop worrying about these other things." (North to Poindexter, through Earl, 10/29/86).96 96 North also expressed frustration over the investigation of Secord's air line, Southern Air Transport. (Id.) Declassified and Approved For Release 2012/02/28: CIA-RDP89G00643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Appendix B Charts and Narratives The following charts and accompanying narrative explanations represent an estimate of the arms transactions with Iran based on evidence developed by the Board from interviews and documentary materials. B-173 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION ONE: AUGUST 1985 Step 1-Ghorbanifar provides Khashoggi with $1 million post-dated check on August 17. Step 2-Khashoggi deposits $1 million in Nimrodi-controlled Israeli account at Swiss bank. Step 3-Nimrodi notifies Israeli officials of funds having been received. Step 4-Iran transfers $1,217,410 to Iranian account at Swiss bank 1 on August 27 to pay for shipment. Step 5-Israel delivers 100 TOW missiles to Iran on August 30. Step 6-Ghorbanifar notifies Khashoggi that check is covered. 1 Monies are actually transferred to an Iranian Government account prior to release to Ghorbanifar. This intermedi- ate step has been dropped for purposes of simplification. B-174 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION ONE: AUGUST 1985 SALE OF 100 ISRAELI TOW ANTI-TANK MISSILES Transfer of funds for payment GHORBANIFAR (Iranian intermediary) $1,217,410 (27 August) Authorization to cash check KHASHOGGI (Financing) NIMRODI (For Israel) $1 million post-dated check (17 August) $1 million deposit to account B-175 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION TWO: SEPTEMBER 1985 Step 1-Ghorbanifar provides Khashoggi with $4 million post-dated check. Step 2-Khashoggi deposits $4 million to Nimrodi-controlled account on September 14. Step 3-Nimrodi notifies Israeli officials that funds have been received. Step 4-Israel delivers 408 TOW anti-tank missiles to Iran.on September 14. Step 5-Iran transfers $5 million to Iranian account at Swiss bank on September 18 to cover purchase. Step 6-Ghorbanifar notifies Khashoggi that check is covered. Step 7-Ghorbanifar pays Nimrodi $250,000 for additional eight TOW missiles. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION TWO: SEPTEMBER 1985 SALE OF 408 ISRAELI TOW MISSILES GHORBANIFAR (Iranian intermediary) Authorization to cash check KHASHOGGI (Financing) $4 million deposit to account (14 September) NIMRODI (For Israel) Transfer of funds for payment ($5 million) (18 September) $4 million post-dated check Payment of $250,000 for extra 8 TOWs delivered / \ ISRAEL Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION THREE: NOVEMBER 1985 Step 1-Ghorbanifar deposits $24 million to Nimrodi-controlled account. Step 2-Nimrodi notifies Israel of funds receipt. Step 3-Israeli charter aircraft encounters difficulty in obtaining landing clearance from third country staging point. U.S. assistance sought. Step 4-Iran transfers funds to Iranian accounts in Switzerland to cover purchase of HAWK mis- siles on November 22 and 25.1 Step 5-Eighteen HAWK missiles delivered to Iran aboard CIA proprietary aircraft flown by Secord crew on November 25. Step 6-Iran refuses to pay for obsolete missiles delivered. Cancels deal. Step 7-Nimrodi returns Ghorbanifar's money less $5 million for HAWKS delivered. 1 Two deposits were made to the same Iranian account at Credit Suisse used to finance the two earlier TOW pur- chases. The third deposit was to an Iranian account at a different Swiss bank. The $24.72 million transfer apparently was to cover the purchase of 120 HAWK missiles. The Board has no evidence to conclude for what purpose the other two deposits were intended. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 ----- Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION THREE: NOVEMBER 1985 ABORTED SALE OF 120 ISRAELI HAWK ANTI-AIRCRAFT MISSILES WITH U.S. DELIVERY ASSISTANCE GHORBANIFAR (Iranian intermediary) Transfer of funds for payment ($24,720,000-22 November) ($20,000,000-22 November) ($20,000,000-25 November) $19 million refunded $24 million Jej deposited to account NIMRODI (For Israel) $5 million held against return of 18 HAWKs IRAN 17 HAWK missiles sit at airport until February 1986 Secord crew flies CIA Iran refuses to proprietary pay for obsolete aircraft (707) missiles. Cancels deal with 18 HAWK Notification of funds receipt ISRAEL missiles to Tehran (25 November) THIRD COUNTRY TRANSHIPMENT POINT Israeli charter encounters problems with third country authorities. U.S. assistance requested (19 November) B-179 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION FOUR: FEBRUARY 1986 Step 1-Ghorbanifar provides Khashoggi with four post-dated checks for $3 million each. Step 2-Khashoggi deposits $10 million in Lake Resources account on February 10. Step 3-$3.7 million is transferred to CIA account at Swiss bank on February 10 and 11. Step 4-CIA certifies availability of funds to DoD for purchase of 1,000 TOWs. Step 5-DoD signs over 1,000 TOWs to CIA on February 13. Step 6-Southern Air Transport (SAT) flies TOWs to Israel on February 14. Step 7-Secord crew flying Israeli false flag aircraft delivers TOWs to Iran on February 17 and 27. Step 8-17 HAWK missiles 1 carried back to Israel on return flight. Step 9-Iran transfers $7.85 million to Swiss account on March 3 to cover repayment of Khashoggi.2 Step 10-Ghorbanifar makes deposit to Israeli account controlled by Amiram Nir. Step 11-Nir transfers funds to Lake Resources account. Step 12-Ghorbanifar notifies Khashoggi that checks are covered. Step 13-Khashoggi is repaid $12 million from Lake Resources account by April 11. NOTE: The difference between . what Iran was charged and DoD paid leaves $6.3 million unac- counted for and available for diversion. 1 The eighteenth missile was test-fired without success at an Iraqi fighter over Kharg Island. 2 The Board concludes that the difference between this transfer and the $12 million repaid Khashoggi was covered by the $5 million withheld by Israel pending return of the HAWK missiles. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION FOUR: FEBRUARY 1985 SALE OF 1,000 U.S. TOW MISSILES GHORBANIFAR (Iranian intermediary) 0 Funds transferred to cover checks $7.85 million (3 March) IRAN Authorization 4 post-dated to cash checks checks ? J01 $3 million each KHASHOGGI (Financing) Payment of $12 million completed (11 April) NIR (For Israel) Funds ?$7 million? deposited L $5 million from HAWK sale ISRAEL J $10 million deposited (10 February) LAKE RESOURCES (Secord account) Funds \ (Staging) ?$12 million? deposited TOWs flown to Tel Aviv by Southern Air Transport (SAT) $3.7 million deposited (10/11 February) (14 February) 1,000 TOWs Signed over to "CIA (13 February) 0 Notice of funds availability DoD B-181 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION FIVE: MAY 1986 (SUPPLEMENTED IN AUGUST 1986) Step 1-Ghorbanifar provides Khashoggi with 3 post-dated checks for $1, 6, and 11 million. Step 2-Khashoggi deposits $15 million to Lake Resources account on May 14. Step 3-Lake Resources transfers $6.5 million to CIA Swiss account on May 15. Step 4-CIA certifies availability of funds to DoD on May 16. Step 5-DoD signs over 508 TOWs and quantity of HAWK spare parts on May 16 and 19. Step 6-SAT flies TOWs and HAWK spares to Israel on May 23 and 24. Step 7-One pallet of HAWK spares arrives in Tehran with McFarlane party on May 25. Step 8.-Second aircraft with additional HAWK spares turned back in mid-flight when no hos- tages are released (May 25). Step 9-Iran transfers $8 million to Swiss account in July and August in payment against goods received. Step 10-Additional HAWK spares delivered to Iran on August 3. Step 11-Ghorbanifar transfers funds to Israeli account controlled by Nir. Step 12-Nir transfers funds to Lake Resources account. Step 13-Ghorbanifar authorizes Khashoggi to expose $3 million against checks held on July 24. Step 14-Ghorbanifar authorizes Khashoggi to expose additional $5 million in August. Step 15-By August, Khashoggi has been repaid out of Lake Resources account $8 million of the $15 million loaned. NOTE: The difference between the amount charged Iran (as advanced by Khashoggi) and that paid to DoD leaves an additional $8.5 million unaccounted for and available for diversion. Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 Declassified and Approved For Release 2012/02/28: CIA-RDP89GO0643R001300120001-9 TRANSACTION FIVE: MAY 1986 (SUPPLEMENTED IN AUGUST) PARTIALLY COMPLETED SALE OF VARIOUS U.S. HAWK MISSILE SYSTEM SPARE PARTS Transfer of $8 million (July-August) GHORBANIFAR (Iranian intermediary) July 24 authorization to expose $3 million August au