Shultz Had Free Hand in Daniloff Deal

The complex deal that freed American journalist Nicholas Daniloff was hammered out with the Soviet Union after Secretary of State George P. Shultz made a personal appeal to President Reagan and won wide latitude to arrange the final terms as he thought best.

“Shultz asked Reagan for authority last Thursday or Friday to try to close the deal over the weekend” with Soviet Foreign Minister Eduard A. Shevardnadze, according to a government source close to the bargaining. “He said he needed the authority to operate on the same level as Shevardnadze. Shevardnadze was the point man for (Soviet leader Mikhail S.) Gorbachev--’designated hitter’ was the way Shultz put it.

“He said he needed a little flexibility, and he got it. But he didn’t exactly say what he was going to do.”

U.N. Expulsions Eased

Under the terms of the agreement Shultz ultimately worked out for Daniloff’s freedom and announced Tuesday, an accused Soviet spy was allowed to go home, the expulsion order against Soviet diplomats at the United Nations was relaxed and a prominent Soviet dissident will be released.

Despite continued grumbling in the U.S. intelligence community that the deal makes it easier for the Soviets to use the United Nations as a base for espionage, Shultz described the negotiations as “a pretty good week for us.”

The package was cobbled together by Shultz and Shevardnadze during almost 24 hours of negotiations stretching over 10 days.

At separate press conferences Tuesday, Shultz and Shevardnadze said the package includes these major elements:

--Daniloff, Moscow correspondent for U.S. News & World Report, was allowed to leave the Soviet Union on Monday without a trial on the espionage charges that the United States had described as a “frame-up.” He flew back to Washington late Tuesday from Frankfurt, West Germany, and said he felt his claims that he was not a spy were vindicated by the swap.

--Gennady F. Zakharov, a Soviet employee of the U.N. Secretariat, pleaded no contest Tuesday to a single count of espionage and was immediately allowed to return to Moscow. A no contest plea is legally equivalent to conviction.

--Yuri Orlov, a veteran Soviet human rights activist exiled to a village near the Arctic Circle, and his wife will be allowed to leave the Soviet Union within a week and almost certainly will settle in the United States.

--At least some of the 25 Soviet diplomats at the United Nations who were to have been expelled by today will be allowed to remain in the United States for at least another two weeks and perhaps longer, despite Shultz’s declaration last week that the United States would never relax the expulsion order. Negotiations about the Soviets’ fate will continue.

--President Reagan accepted Soviet leader Mikhail S. Gorbachev’s proposal for a mini-summit meeting Oct. 11-12 in Iceland.

Daniloff was arrested by the KGB on Aug. 30 after he accepted from a Soviet acquaintance a package that the secret police said contained military information. His seizure followed by a week the arrest in New York of Zakharov, who was accused of trying to buy U.S. secrets from an FBI informant.

Reagan, who described Daniloff as a “hostage” and Zakharov as a “spy,” had declared that the United States would never agree to trade one for the other. In a brief question-and-answer session with reporters Tuesday, he insisted that the deal was not a straight trade because Washington would have been willing to swap Zakharov for Orlov, the dissident, even if Daniloff had never been arrested.

“There was no connection between these two releases,” Reagan said. “There were other arrangements with regard to Zakharov that resulted in his being freed. . . . There have been several instances over the recent years in which we have arrested a spy, convicted a spy here in this country, and in each instance we ended up--rather than giving them board and room here--we ended up exchanging them for dissidents and people who wanted exit from the Soviet Union.”

Reagan Withdraws Quip

But the President also withdrew a quip he had made Monday. Asked, after the Soviets released Daniloff, whether the United States had blinked in its confrontion with Moscow, Reagan said, “They blinked.” On Tuesday, at the White House, Reagan acknowledged, “I shouldn’t have said that. No comment.”

A source in the U.S. intelligence community said he was disappointed because the deal did appear to equate Daniloff and Zakharov.

“Over and over, there was the assertion that there would be no linkage, no deal,” he said. But now that Daniloff has been freed, he added, “you’d have to be blind and partisan to think that was so. The reaction of the White House from Day One was panic and weakness, and we never recouped from that initial reaction.”

Shultz said the deal achieved several U.S. objectives--the release of Daniloff, an agreement by the Soviets to reduce the size of their U.N. mission and elimination of disputes that threatened to block “potentially positive” negotiations with Moscow on arms control and other issues.

Although the United States regularly has traded convicted spies for Soviet dissidents, the spies usually had to first serve some time in jail. One official involved in the process said that the Zakharov precedent will partly unravel a policy in place since 1978 that calls for prosecution of accused spies who are not fully protected by diplomatic immunity.

“There was a complete miscalculation on the part of the State Department about the criminal process,” the official said. “There was a lack of understanding by Shultz and Shevardnadze about what had to be done in court. Shultz didn’t have counsel with him when he was negotiating with Shevardnadze, and it showed. I sure hope Shultz doesn’t do his will without a lawyer.”

Possibly the most controversial part of the package concerned the 25 Soviet diplomats at the United Nations who were ordered to leave the country by today. Shultz said that “the majority” of them have already departed but that the rest were given a “grace period” until Oct. 15. Shultz and Shevardnadze reached an understanding that seven of the 25, including the chiefs of the KGB and the GRU military intelligence unit at the United Nations, would be allowed to remain in the United States for at least their regular tours of duty, the source said.

The source, who opposes the agreement, said those two officials have been identified by U.S. counterintelligence as Valery Ivanovich Savchenko, who is listed as a counselor, and Vladislav Borisovich Skvortsov, who is listed as a senior counselor--both in political affairs. The official said that Savchenko is chief of the KGB station and Skvortsov is GRU chief at the United Nations.

Administration officials have said that all 25 on the list are Soviet intelligence officers for the KGB or the GRU military intelligence unit.

Shultz said that Moscow has agreed to reduce the staff at its U.N. mission by 25 persons now and by about 40%--to a total of 170--within the next 18 months.