Contracting Out U.S. Foreign Policy
excerpted from the book
The Iran-Contra Connection
Secret Teams and Covert Operations in the Reagan
by Jonathan Marshall, Peter Dale Scott , Jane
South End Press, 1987, paper
... rituals of mystification ... have become part of the American
experience whenever the integrity of the governmental process
is called deeply into question. The Warren Commission Report after
John F. Kennedy's assassination initiated this kind of exercise
in the politics of reassurance that now seems indispensable at
times of public crisis.
The policies embodied in both the [Iran-Contra] arms sales and
the diversion of funds for a variety of dirty purposes were carried
out by powerful transnational networks of individuals and organizations
long associated with rabid anti-communism, and centering on a
mixture of former CIA officials and anti-Castro exiles, but stretching
out to include military and civilian centers of reaction, as well
as a mercenary cadre available for lethal undertakings of any
sort. An extremely distressing element in the story is the incredibly
durable half-life of former career participants in covert operations;
only for plutonium is the disposal problem greater! For money,
thrills, habit, and conviction these men find ways to regroup
in the private sector and carry on with their efforts to destroy
progressive and nationalist political possibilities in Third World
countries, as well as to sell arms and drugs, and carry out an
unauthorized private sector foreign policy that is vicious and
invisible and acknowledges no limits. An unappreciated cost of
the Reagan years has been to introduce into the sinews of government
the virus of fascist conspiratorial politics, especially in the
Western Hemisphere. In this regard, the reliance on North and
Poindexter is not a managerial glitch, but rather a decision to
depend on those with such a passionate commitment to the radical
right who happened to be positioned for action, and would be trusted
to serve as faithful instruments of policy, uninhibited by either
standard bureaucratic procedures or constitutional restraints.
The Reagan presidency has rebuilt the formal legions of covert
operations in the CIA and has, as well, given a taste of power
to the shadow network of ex-CIA, ex-military, exile, and extremist
forces in this country and abroad... This paramilitary orientation
ravages society by preying upon its capacities for law and morality,
infusing drugs, corrupting police and local government, and convincing
the citizenry that their lives are played out in a virtual cesspool
of vice and menace, and that activism is futile and unpatriotic.
Contracting Out U.S. Foreign Policy
The imperial presidency, temporarily checked by the Vietnam defeat
and Watergate scandal, has reemerged during the Reagan years.
As always, the reason lies in excessive congressional deference
to the executive branch. But since 1980, presidential power has
been aggrandized by the Reagan administration's sophisticated
strategies for circumventing Congress in the shaping and implementing
of foreign policy.
President Reagan's secret weapon is "contracting out"
such normal government functions as funding and executing policy
to the "private" sector while keeping policy making
itself in the hands of the state. But unlike typical commercial
examples of the practice, the administration has contracted to
agents who are themselves total creatures of government-in particular,
of government intelligence agencies. In their "private"
capacities, however, these agents nonetheless fall largely outside
This strategy involves much more than confining policy making
and implementation to a tight circle within the National Security
Council, however much a dismayed Secretary of State George Shultz
has focused public attention on his personal exclusion from decisions.
President Reagan's dependence on the NSC to the near exclusion
of traditional bureaucracies is, after all, far from unique; Henry
Kissinger mastered that art in the Nixon era and for it won the
admiration of Congress and the American press.
Reagan's innovation was much more significant: while bypassing
standard channels of government, his administration found foreign
governments and rich individuals to contribute the money; CIA
and military special operations veterans to contribute the manpower;
and private firms to contribute the logistics for its operations.
In effect, White House operatives set up a parallel Treasury,
Army, Air Force and State Department to negotiate with terrorists,
fight covert wars and subvert the law wherever they deemed appropriate.
Farming such covert operations outside even the CIA served to
insulate the president and his advisors from scrutiny and responsibility.
As a result, major elements of White House policy escaped
public notice or congressional review. This parallel private network
functioned outside normal lines of oversight and accountability,
and once set in motion, could operate effectively with minimal
presidential guidance. But as distinguished from "privatization,"
a term often misapplied to the Iran and contra affairs, the contracting
method always left essential policy direction in the White House.
The Reagan strategy had its roots in the classic intelligence
practice of using proprietaries and "cut-outs" to effect
policy while preserving deniability. Always useful against unwanted
public scrutiny, these techniques were perfectly suited to the
1980s' political environment of presidential activism on behalf
of the "Reagan Doctrine," the commitment to roll back
pro-Soviet regimes in the Third World. Congressional doubts and
public hostility made overt pursuit of that doctrine difficult
or impossible. Even the CIA was a problematic tool of policy owing
to legal requirements that it report covert operations to Congress.
"Since the Vietnam War," one Reagan NSC member told
a reporter, reflecting the widespread distrust of Congress by
administration policymakers, "we have had this growing involvement
by the legislative branch in the details of foreign policy that-you
can make a constitutional argument-are properly left to the president.
When you do that, you drive him in the direction of using other
techniques to achieve objectives."
Ironically, however, deep-cover contracting also appealed
to administration activists frustrated by bureaucratic gridlock
between warring departments and the tendency of rival policymakers
to leak details of unpopular, unwise or illegal policies.
Such rivalries "made it impossible to function at all"
except in secret, argued former Pentagon special operations planner
Noel Koch. The lesson that individuals like Oliver North drew,
according to Koch, was "If you're going to do anything bold
or innovative, you're going to have to do things through irregular
Or as another "covert missions planner" said of
North's decision to rely on former Pentagon special operations
veterans for his secret missions "the CIA and NSC have no
capability to do things in a secure fashion. You want to do something
quietly, then you can't tell the bureaucracies. Here's a guy who
can go to key people in foreign countries and get things done.
As a private citizen, he has no obligation to tell anyone."
And quite apart from the matter of capabilities, many insiders
doubted even the resolve of the CIA to implement tough policies
abroad. Angelo Codevilla, a hawkish former staffer on the Senate
Intelligence Committee, expressed the view of many "roll-back"
conservatives in Washington:
The Director of the Central Intelligence Agency, William Casey...personally
seems to favor the victory of liberation movements. His Agency
has the charter for dispensing the aid. But from among the CIA's
senior personnel have come strong echoes of the State Department's
view of the role of liberation movements in U.S.-Soviet relations.
In their dealings with Congress and the NSC, CIA officials have
often outdone even their colleagues in the State Department in
reticence to provide aid to such movements quantitatively and
qualitatively sufficient for victory, declaring that the Agency
would rather be rid of the burden of supplying such aid at all.
The White House decisionmaking center for covert operations
and contracting-out strategy lay within a tiny team of select
State, Defense, CIA and NSC officials known as the "208 Committee"
or "Policy Development Group." Oliver North, the workaholic
organizer of secret contra supply missions and Iran arms deals,
was one of its most active members. Meeting in the Crisis Management
Center in Room 208 of the Old Executive Office Building, surrounded
by secure computer data links to the National Security Agency,
this group could plan secret operations free from the obligation
to report to the intelligence committees of Congress. Its mission
was to implement the Reagan doctrine of fighting Soviet influence
throughout the Third World, wherever possible by supporting indigenous
forces. Its thorough overview of missions and logistics included
such details as "which weapons will be shipped, which secret
warehouse goods used, which middlemen will deliver them to clandestine
airstrips." For the most sensitive policies, as with the
Iran arms shipments, only a few members of even this group took
part in policy discussions.
For North and others in this select circle, the guiding principle
was power and the task was to expand it without answering to other
authorities. As one White House memo from 1982 outlined the mission
of "Project Democracy"-the rubric under which the NSC
began to undertake foreign policy initiatives of its own-"we
need to examine how law and executive order can be made more liberal
to permit covert action on a broader scale." i° Contracting-out
provided means to subvert the law and stretch the scope of executive
Nicaragua: The Test Case
Nicaragua saw the first application of the strategy. The Reagan
administration's policy toward the Sandinistas from the start
was summed up by the title of a report prepared by then-State
Department counselor Robert McFarlane in early 1981: "Taking
the war to Nicaragua." But owing to congressional reticence,
the White House had to lie about its ultimate intentions, pledging
that CIA assistance to the contras merely served to block Sandinista
arms shipments to the Salvadoran rebels. "There were always
two tracks," one CIA official explained, "the publicly
stated CIA objective of interdicting weapons to Salvadoran guerrillas,
and the overthrow of the Sandinista government." On March
9,1981, President Reagan took the first step to launching the
covert war under that public goal by issuing an official "finding"
that Nicaraguan arms smuggling was harming U.S. national security
The need for continued deception and greater action prompted
a November 16, 1981 presidential order to begin a full-scale campaign
against Nicaragua. It authorized an initial $19.5 million for
the guerrilla war, justified once again by the need for arms interdiction.
But as one contra source said of that rationale in 1982, "If
that's what the CIA told Congress, they forgot to tell us."
The November order specifically directed the CIA to wage its
covert war "primarily through non-Americans" and "with
foreign governments as appropriate." In implementing that
early version of the "contracting out" strategy, the
CIA piggybacked on operations already underway by two other governments:
Argentina and Israel.
The first of these "deniable" partners was Argentina,
whose military rulers had, since the mid- 1970s, unleashed an
orgy of violence against their own civilian population in the
course of stamping out a leftist guerrilla movement. Argentine
agents had worked in Nicaragua even before Somoza's overthrow
to help track down Argentine Montoneros guerrillas who had teamed
up in exile with the Sandinistas; they also advised security forces
and death squads in Guatemala and El Salvador. Now Argentina's
military junta supplied as many as 100 veterans of its own dirty
war against the left to train the first contras in urban terrorist
tactics and guerrilla war. These were not just any contras: Argentina's
proteges were all recruits from Somoza's brutal National Guard.
Visits to Buenos Aires in 1981 by such Reagan administration emissaries
as Joint Chiefs of Staff Chairman General Edwin Meyer, Ambassador-at-Large
Vernon Walters and UN Ambassador Jeane Kirkpatrick helped establish
the alliance of the CIA and Argentine military in Central America.
A November I meeting of CIA director William Casey and the American-trained
leader of Argentina's military junta, Gen. Leopold Galtieri, cemented
At the same time, CIA paymasters-who had allocated $50 million
to the training program-prevailed on several key contra leaders
to unify their anti-Sandinista groups behind the Argentine-trained
veterans of Somoza s National Guard. Thus the Nicaraguan Democratic
Front, or FDN, was formed on August 11, 1981, just when Gen. Galtieri
was in Washington on an official visit.
Foreign Money, Foreign Arms
Money for the contras that once flowed freely from CIA contingency
accounts began to dry up in 1983 when Congress began setting limits
on its funding of the burgeoning and ever-more-unpopular war.
Legislators were finally awakening to the fact that the Argentine-trained
Somocistas wanted not a democratic accommodation with the Sandinistas,
but their ouster.
On December 8, 1982, the House of Representatives passed a
bill sponsored by Rep. Edward Boland of Massachusetts barring
U.S. covert actions "for the purpose of overthrowing the
government of Nicaragua." That new law alone did not slow
the administration down, but the demands of an enlarged war did.
Later the next year, the CIA had to augment its budget by persuading
the Pentagon to donate $12 million in "surplus" arms
to the agency for delivery to the contras. That December, however
Congress voted a $24 million ceiling on CIA spending for its covert
war in the coming fiscal year.
In May 1984 that half-closed spigot was fully plugged in the
wake of revelations that CIA agents, acting in the name of the
contras, had seeded Nicaraguan harbors with mines. These agents
included Salvadoran Hondurans, Argentinians, Chileans and Ecuadorans-but
ironically, no Nicaraguans. That provocative escalation had been
conceived by the NSC s Oliver North and a top CIA officer in charge
of anti-Sandinista operations to get more bang for limited bucks.
But it outraged Managua's Western trading partners and chagrined
Congress, whose intelligence oversight committees were taken by
surprise. The fiction of arms interdiction" held up no longer.
Congress rejected a supplemental appropriation for the contras.
Three months later, in August, it passed the Boland Amendment,
prohibiting any administration agency involved in "intelligence
activities" from "supporting, directly or indirectly,
military or paramilitary operations in Nicaragua by any nation,
group, organization or individual."
The contras had some resources of their own to fall back on-most
notably, we shall see in Chapter VI) profits from drug trafficking.
But without more substantial help from the United States, their
cause still seemed doomed until North covered his own harbor-mining
folly with an even greater one: the proposal (accepted by National
Security Adviser Robert McFarlane) to subvert Congress' intent
by building a "private" funding and supply network.
North claimed that the Boland Amendment's reference to any "agency
or entity of the United States involved m intelligence activities"
did not apply to the National Security Council. He criss-crossed
the globe in 1984 and 1985, raising as much as $1 million a month
from private and foreign government sources to keep the administration's
proxy war alive. North's agents in turn carried cash from his
office safe to Central America for disbursement to the rebels.
One of North's allies in this project was Elliot Abrams, the
Assistant Secretary of State for Inter-American Affairs and an
enthusiast of the contra war against Nicaragua. Abrams solicited
money from other countries, ostensibly for humanitarian purposes.
But he consciously "decided to use the account opened by
North without procedures for monitoring expenditures from the
account," according to a Senate committee report. This studied
lack of interest closely paralleled the ClA's own official policy
of asking no questions about the origin of large sums of money
in the contras' bank accounts.
Together with Abrams and other officials and private agents,
North raised money from a remarkable variety of sources outside
the United States-and thus outside the jurisdiction of Congress.
Amos Perlmutter, an American political scientist with close connections
to the Israeli government, reports that, "AII those who are
clients of the United States have been told more or less, 'You've
got to do something for the contras."
According to contra fundraiser and presidential candidate
Pat Robertson, one helping hand for the anti-Sandinista rebels
came from South Africa. For example, some of the planes that supplied
the contras were made available by a South African air freight
company, apparently after the head of the ClA's Latin America
division took a secret trip to
South Africa in early 1985 to solicit aid for the anti-Sandinista
cause. The South African aid may help explain Reagan's vigorous
opposition to economic sanctions and CIA director William Casey's
efforts to line up Saudi oil for the apartheid regime.
Brunei: In the summer of 1985, during the dry spell in congressional
aid, Secretary of State George Shultz and his chief assistant
on Latin American affairs, Elliott Abrams, approached the Sultan
of Brunei for a donation to the contra cause. The sultan, fabulously
wealthy from oil and gas revenues, reportedly deposited $10 million
in a Swiss bank account controlled by Oliver North. He was also
a creditor to the key Irangate arms broker, Adnan Khashoggi. Some
U.S. officials suspect that the Sultan's money never reached the
contras, but instead went to reimburse Khashoggi, who advanced
millions of dollars to finance U.S. arms sales to Iran.
Saudi Arabia: Casey also worked on Saudi Arabia-successfully-
to support Washington's cause in Central America. The CIA director
met with King Fahd in February 1984 to press his case. Working
in tandem with Casey to persuade the royal family were two private
individuals with tremendous experience in the field of Mideast
arms sales: retired Air Force Gen. Richard Secord, who steered
the sale of AWACS surveillance planes to Saudi Arabia through
Congress in 1981, and Robert Lilac, former commander of the U.S.
Air Force Logistics Command in Saudi Arabia, who left the NSC
in 1983 and now works for the Saudi Ambassador in Washington,
D.C. The Saudi royal family reportedly turned over $32 million
to the rebels in Honduras and Costa Rica in gratitude for the
administration's success in overcoming the Israeli lobby's resistance
to the $8.5 billion AWACS sale. Saudi money also supported anti-communists
in Angola and Afghanistan. Most recently, evidence has come to
light that Saudi Arabia financed arms purchases by its feared
adversary Iran, in hopes of moderating the regime's revolutionary,
messianic mission. Some of these monies in turn were allegedly
deposited by Israeli intermediaries in Switzerland for disbursement
to the contras.
South Korea: Less visibly, South Korea, too, has given generously
to the contras, and on at least one occasion shipped them arms
paid for by Saudi Arabia. It has also provided an important back
channel for arms shipments to the Khomeini regime in Iran. The
arms and funding pipelines from South Korea were kept open by
a combination of Washington lobbyists, ex-CIA officers and private
organizations, many with ties to Saudi Arabia as well.
No country, however, has played a more significant surrogate
role in both Central America and Iran than Israel. As early as
1981, Israel's economic minister Ya'acov Meridor had declared,
"Israel will be your proxy." Although Israeli leaders
have officially denied aiding the contras, the record of their
involvement is clear and unequivocal. As recently as September
1986, according to Assistant Secretary of State Elliot Abrams,
Israel sent the contras by sea a large shipment of Soviet-made
arms, presumably captured in Lebanon.
Israel's proxy activities on behalf of the contras grew out
of a long tradition of military support for authoritarian regimes
in Central America, including that of Anastasio Somoza in Nicaragua.
Israel was also in on the ground floor with the contras when Somoza
finally fled the country. Haifa University professor Benjamin
Beit-Hallahmi reports that "when the CIA was setting up the
contra organization in 1981, the Mossad was also there, carrying
out the training and support for the first units.
Finally, Israel was a leading arms supplier to Argentina during
the period of its military rule, despite anti-semitic violence
and the Falklands War. Indirectly, therefore, Israel bolstered
the contras by arming their direct military supporters in the
first years of opposition.
The first major Israeli arms deliveries to the contras appear
to have begun shortly after the pull-out of Argentine trainers
and suppliers from Central America in the aftermath of the Falklands
War. "As early as 1982," according to U.S. News and
World Report, Gen. Richard Secord took charge of a Pentagon operation
"in which Israel shipped tons of weapons captured during
its invasion of Lebanon to a CIA arms depot in San Antonio. From
Texas, the guns were shipped to the contras.
More than arms seem to have been involved. Replacing the Argentine
advisers were "retired or reserve Israeli army commanders...hired
by shadowy private firms," according to Time magazine. America's
contractors had apparently subcontracted the job.
The point man for this cooperative strategy was David Kimche,
a 30-year Mossad veteran who rose to direct Israel's Foreign Ministry
until the fall of 1986. Known as Israel's "key contras specialist,"
he has been directly linked to surrogate funding of contras. And
it was Kimche, by all accounts, who in 1985 persuaded the Reagan
administration to sanction Israel's arms pipeline to Tehran in
order to influence lranian "moderates." Kimche's Israeli
patron Ariel Sharon was himself an architect not only of the contra
supply operation but also of Israeli arms sales to Iran. And Kimche's
White House contacts on the Iran operation-Robert McFarlane and
Oliver North-were in turn the masterminds of the contra aid network
Nearly all of these foreign funding sources were either untraceable
(AW ACS kickbacks, Iran payments through SwitzerIand or untouchable
(Israel, South Korea). A Congress united behind Israel was not
(and still is not) inclined to ask too many questions about its
arms deliveries in Central America or Iran. Nor, after Jimmy Carter's
abortive talk of a pullback from Korea, would Congress cut off
the Seoul regime. Thus the White House could, for a time at least,
safely flout the intent of Congress with help from these U.S.
Personnel and Logistics: Going Private
Just as Congress was loathe to touch these offshore suppliers,
so was it reluctant to rein in the elaborate old-boy network of
retired CIA and military covert operators who carried out Reagan's
policies in the field. Their common experiences run the gamut
from the CIA-sponsored war against Castro in the early 1960s,
to the covert war in Laos later in that decade, to shady arms
and intelligence operations in Iran by the mid-1970s. Out of these
experiences came shared expertise, close-knit contacts and trusting
friendships that would bring them together again as a covert network
in the 1980s.
Among the most significant of these figures is retired Gen.
John Singlaub, a veteran of the CIA and military "special
operations" in Indochina who now implements the Reagan doctrine
through his leadership of the World Anti-Communist League and
his Pentagon advisory role. His special operations colleagues
from the Vietnam era run similar aid groups, including the National
Defense Council, Refugee Relief International, and Air Commandos
Association. All these groups coordinated their efforts through
Oliver North on the NSC.
Working with North and Singlaub in Vietnam and Laos as an
air supply specialist on ClA-connected covert missions was (then)
Lieutenant Colonel Richard Secord. In 1981, as deputy assistant
secretary of defense for the Near East, Africa and South Asia,
he acted as the Pentagon's chief representative and lobbyist on
the AWACS sale that set the terms for subsequent Saudi kickbacks
to the contras. His job also put him in a position to follow Israel's
covert arms shipments to Iran in the early 1980s. A career-long
specialist in covert operations, Secord had what one congressional
source called "incredible intelligence contacts." After
leaving the government in 1983, Secord and his Iranian-born business
partner Albert Hakim managed the private supply network for the
contras under North's supervision, using Saudi and Iranian money
deposited in Switzerland to purchase planes and other supplies.
Secord was also a key logistics agent in the Iran arms deals of
198S-86. One intelligence source called Secord "the 7-Eleven
of this type of intelligence activity open 24 hours a day."
North's own assessment was equally apt: "A man of many talents
ol' Secord is."
Another Laos-era associate of Singlaub and Secord was CIA
officer Thomas Clines. As a private businessman by 1986, he helped
Secord arrange clandestine arms deliveries to the contras out
of Portugal, recruited ex-CIA pilots for the supply operation
and helped Oliver North obtain a ship used in the attempt to rescue
American hostages in Lebanon.
Clines had begun putting together a private aid network even
before Ronald Reagan entered the White House. In 1978, he and
Ed Wilson, a former CIA agent and friend of Secord who has since
been convicted of supplying explosive devices to Libya, reportedly
began negotiating a $650,000 deal with Nicaraguan dictator Anastasio
Somoza "to create a search and destroy apparatus against
Somoza's enemies." The negotiations commenced just as the
Israelis were moving to supply essentially all of Somoza's arms.
Both Israel's munitions representatives and Clines, who left the
CIA on bad terms with the Carter administration, were operating
directly against official policy toward Nicaragua. But their efforts
foreshadowed perfectly Reagan's more militant strategy.
So, it would appear, did the work of another retired CIA officer,
Felix Rodriguez, who had served under Clines in countless CIA
operations in Cuba, the Congo and Vietnam. In his "retirement,"
Rodriguez went to work for Clines in the late 1970s as a representative
of his arms sales business in Latin America. Rodriguez also served
as an arms broker for Gerard Latchinian in 1979-80. Latchinian,
who would later be convicted of a drug-financed assassination
plot in Honduras for the benefit of the CIA's favorite general,
Gustavo Alvarez Martinez, was particularly close to Israeli arms
merchants in Guatemala and Miami. Thus Rodriguez appears to have
supplied a connection between Clines and the Israelis in Central
America. Rodriguez would later become the contras' logistics mastermind
at Ilopango military airport in El Salvador.
A host of lesser covert operators joined these private individuals
in carrying out the aims of the Reagan White House. They included
Cuban exile terrorist veterans of the secret war against Castro
directed by Clines from the CIA station in Miami, former CIA contract
pilots who flew supply missions to Central America, former Pentagon
special operations officers skilled in covert missions, and a
private aid network revolving around such organizations as the
World Anti-Communist League, Sovereign Military Order of Malta
and CAUSA, a political arms of Sun Myung Moon's Unification Church.
Serving this group was also a network of private companies
long experienced at serving undercover operations of the government.
The best known of these is Southern Air Transport, a CIA proprietary
company since 1960 that was sold in 1973 to its president. Sales
of other such proprietaries were conditioned on "an agreement
that the proprietary would continue to provide goods or services
to the CIA," according to a 1976 congressional report. Southern
Air Transport (SAT) was the airline of choice for both the private
contra aid operation and the delivery of U.S. arms to Iran in
1985-86. The same aircraft that delivered U.S. weapons to Tehran
via Israel picked up Soviet-made arms from Israeli-controlled
stocks in Lisbon on their return trips to Central America. One
retired Air Force officer involved in supplying the contras warned
crew members to protect SAT's cover: "We don't want to get
SAT or ourselves burned with a leak or get money hung up where
we would have to expose the op[eration] to get it back."
In retrospect, the practice of contracting out foreign policy
to such private agents, with all its dangers and abuses, was almost
inevitable given the conditions of the Reagan presidency. A militant,
sometimes radical group of policy makers confronted a much more
cautious Congress and bureaucracy. A president flush with a tremendous
election victory was frustrated by the unpopularity of so many
of his specific foreign policies. The temptation under such circumstances
was to skirt the law, even break the rules in the faith that deeply
covered clandestine acts would go unnoticed and that the President's
personal popularity would prevail in a showdown with political
critics. The temptation, in short, was to use the contracting
out strategy to achieve total presidential supremacy in foreign
policy. Curbing the ability of future presidents to avoid public
accountability this way is an essential first step toward also
curbing the domestic and foreign abuses that result.
Iran Contra Connection