Contracting Out U.S. Foreign Policy

excerpted from the book

The Iran-Contra Connection

Secret Teams and Covert Operations in the Reagan Era

by Jonathan Marshall, Peter Dale Scott , Jane Hunter

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 congressional purview.

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 channels."

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 orders.

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 interests.

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 it.

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. aid recipients.

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.

The Iran Contra Connection

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