Secret Iran Talks Began Last Year : Reagan Sought Tehran’s Help to End ’85 Hijacking; Policy Shift Split Aides

It was one of the most agonizing crises of Ronald Reagan’s time in the White House: 39 Americans, seized aboard a hijacked TWA jetliner in June, 1985, were being held captive by Shia Muslim terrorists in Beirut.

For help, Reagan and his top aides turned to an unlikely quarter--Iran. It was Hashemi Rafsanjani, the Speaker of Iran’s Parliament and a top lieutenant of the Ayatollah Ruhollah Khomeini, who finally engineered the release of the hostages.

Rafsanjani’s success marked a turning point in a still more astonishing twist of U.S. policy: a decision by Reagan to violate his own strict policies against shipping arms to Iran, which was on his own list of countries that supported terrorism. From then on, U.S. sources said, the National Security Council in the White House maintained a clandestine operation for supplying military equipment to Khomeini’s radical Islamic regime, which needed it for its war with neighboring Iraq.

Three Americans Freed

That extraordinary operation, in turn, apparently led to the release over the last 14 months of three of the American hostages who had been held for months by Muslim terrorists in Lebanon.

But if the arms deal resulted in freedom for three Americans, it has also left the Administration’s anti-terrorism policy in confusion. And it has infuriated U.S. allies who had agreed to cut back their own arms sales to Iran.

For all its global ramifications, it was an operation developed and conducted in the utmost secrecy. During it all, Reagan never gave so much as a hint of what was going on.

“Let me . . . make it plain,” he said at the time of the TWA hostage crisis, “that America will never make concessions to terrorists. To do so would only invite more terrorism. Nor will we ask nor pressure any other government to do so. Once we head down that path, there will be no end to it--no end to the suffering of innocent people, no end to the bloody ransom all civilized nations must pay.”

But even then, secret talks were under way with Iran. The resulting arms deal, in which Israel bought spare parts for planes and missiles and covertly shipped them on to Iran, was run directly from the White House because officials wanted to keep the operation secret from Congress and the public, the sources said.

A Murky Network

The deal threw top Reagan aides including Robert C. McFarlane, his national security adviser until late last year, into the middle of a murky network of Iranian and Israeli arms dealers. At one point, Rafsanjani told his countrymen last week, McFarlane himself turned up in Tehran with a false Irish passport, a Bible autographed by Reagan and a cake and a brace of pistols as a gift for Iran’s leaders.

But the deal also created deep cleavages within the Administration. Secretary of State George P. Shultz, who had been overruled on the issue, said Friday: “I think the policy of not negotiating for hostages is the right policy.”

And, as details became known last week after Rafsanjani himself discussed some aspects on Iranian radio, Congress demanded an explanation of not only this covert operation but the disclosure of any other secret foreign projects being run from the White House as well.

“This is a major disaster for the United States,” said a senior Shultz aide who objected to the operation when it was first proposed. “It has left us with no coherent policy on terrorism at all.”

In 1985, ironically, Shultz and Secretary of Defense Caspar W. Weinberger had only recently patched up a bruising battle over terrorism policy when the first signals arrived--through a variety of intermediaries--that Iran might be interested in talking to the United States about helping to free hostages in Lebanon.

Ties to Syria, Iran

A secretive terrorist group, Islamic Jihad (Islamic Holy War), had seized five Americans in Beirut and vowed to hold them captive until “all Americans leave Lebanon.” U.S. intelligence analysts said the group had links to both Syria and Iran, and the Administration had sent messages to both countries urging them to use what influence they had to free the captives.

Even then, U.S. officials say, Iran had sent vague signals that it might be willing to cooperate with the United States on some issues--if the Administration would allow the Tehran regime to buy U.S.-made weapons and spare parts. The Iranians said they at least wanted the release of arms shipments that they had already paid for but that had been impounded by the Jimmy Carter Administration in 1980 after Khomeini’s followers seized the U.S. Embassy in Tehran.

In 1984, however, Shultz was intent on cracking down on international terrorism and its Middle Eastern sponsors. Instead of loosening up on Iran’s arms, he ordered the remaining loopholes in the U.S. arms embargo closed.

The ayatollah’s needs for the U.S.-made arms were immense.

When he came to power in the 1979 Iranian revolution that overthrew Shah Mohammed Reza Pahlavi, he inherited a deep dependence on the United States for military supplies. Between 1970 and 1979, the shah had purchased $17 billion worth of American weapons, including 80 F-14 jet fighters and a broad range of other missiles, airplanes, helicopters, tanks, warships and advanced radar units--all of which needed U.S.-made spare parts to stay in operation.

Procurement Office Set Up

The search for those parts was directed from a procurement office established by the Tehran regime in a building in downtown London, a stone’s throw from Westminster Abbey. From that office were distributed what U.S. law enforcement agents called the “Ayatollah’s List,” a computer printout stretching for hundreds of pages and containing such information as the identification number for parts in the U.S. military supply system.

Armed with the list and with millions of dollars in cash, Iranian agents throughout the world sought in the early 1980s to buy the needed items at virtually any cost. A diverse cast of characters was hired, lured or volunteered into the Tehran regime’s procurement effort--ranging from the Iranian owner of a San Diego delicatessen to a Chicago insurance company executive, and from a Portuguese real estate investor to a Swiss commodities dealer living in Brazil.

Initially, at least, the Iranian operatives seemed to have more money than skill. Defrauded repeatedly, they regularly paid greatly inflated prices and sometimes handed over millions of dollars for equipment that never arrived.

Soon, though, the operations became more sophisticated. Last year, for example, U.S. agents broke up a San Diego-based ring of thieves and smugglers who were stealing parts for Iran directly from U.S. Navy warehouses.

Customs agents who intercepted cartons being sent from San Diego to London for shipment to Iran said they found such sophisticated F-14 components as signal data computers worth $450,000 apiece, an infrared recorder valued at $150,000, inertial navigation components valued at $77,000 each and parametric amplifiers for Phoenix missiles valued at $45,000 apiece.

Start of Indirect Contacts

Indirect contacts between the Administration and the Tehran regime had begun even before 1985, U.S. officials said. But after Islamic Jihad began seizing Americans off the streets of Beirut, Reagan and his men faced the prospect of the same kind of drawn-out hostage crisis that immobilized the Carter presidency.

Reagan had entered office in 1981 promising that the U.S. response to terrorism would be “swift and effective retribution.” But as the number of hostages in Beirut grew--and a yellow ribbon went up outside Reagan’s White House office--the Administration’s focus split between deterring future terrorists and finding a way to free the captives.

“There is a pressure that comes from our national sense of humanity, our softness about individual people in trouble,” said a source who was present at some of the Administration’s early policy discussions. “The President reacts that way too, even though it doesn’t track with his policy.”

The idea of exploring a deal with Iran originated with McFarlane, one source said. McFarlane often argued that the United States should seek contacts with relatively “moderate” elements in Tehran to offer the Iranians an alternative to alliance with the Soviet Union, associates said.

Shultz Opposed Plan

Shultz and his aides were flatly opposed. “Several of us made our views very, very clear, including the secretary,” one said. “But the decision was to go right ahead.”

The decision, several sources said, was made by Ronald Reagan himself.

So, beginning in early 1985, McFarlane and an aide, Marine Lt. Col. Oliver L. North, set off on a series of secret missions to London, Geneva and even Iran to work out details of the arms shipments and the hostage exchanges, one source said.

Those negotiations had apparently begun when Trans World Airlines Flight 847 was hijacked on June 14, 1985, en route from Athens to Rome. During the subsequent two-week hostage crisis, Rafsanjani turned up in Syria in response to a U.S. appeal and told leaders of Hezbollah--the militant “Party of God”--that it was in their interest to free the last five hostages.

The captives were freed. To the Administration, one source said, the lesson was, “The Iranians could deliver.”

In the ensuing months, several government sources said, the Administration approved a number of shipments of military hardware through a clandestine supply line supervised by Israeli officials. According to one source, the shipments were handled by private American carriers and included U.S.-made ground-to-ground missiles and spare parts for F-4 Phantom jets, American-made radar systems and C-130 transport planes.

The equipment, several sources said, did not come directly from American stockpiles but from private dealers and--according to one account--the armed forces of Israel.

Traced to Peres

U.S. sources said Israel’s involvement went as high as then-Prime Minister Shimon Peres and Defense Minister Yitzhak Rabin. Rabin, asked by The Times in September about reports of secret arms shipments to Iran, said that Israel had sold nothing to Tehran “without explicit U.S. permission.”

The sources said at least one weapons shipment spurred the terrorists to release the Rev. Benjamin Weir, a Presbyterian minister, in September, 1985--the first fruits of the long negotiations. It took 10 more months--and at least one more arms shipment, a knowledgeable source said--to win the freedom of Father Lawrence M. Jenco, Beirut chief of Catholic Relief Services.

The Iranians alone, one knowledgeable government source said, could not simply order Islamic Jihad to release its hostages. “The Iranians were only one key,” he said, “but you needed a second key--you had to persuade Jihad that it was in its interest to let them go, too.”

Another problem was increasing political turmoil within Iran, where Rafsanjani was under attack by more radical factions for his relatively moderate policies.

But there was turmoil inside Reagan’s Cabinet, too. After Weir’s release, according to a report in the Washington Post, Shultz and Weinberger made a concerted attempt to persuade Reagan to reverse his earlier decision and halt the arms deals. Reagan temporarily ordered the operation stopped in January, 1986, the Post said, but he later resumed it after the hostages’ families increased their public criticism of what they saw as the Administration’s inaction.

Meanwhile, both the U.S. and foreign press and other governments were beginning to notice signs that some arms might be flowing from Israel to Iran, in apparent violation of U.S. policy.

Mysterious Plane

Only days after Weir’s release, for example, a mysterious DC-8 cargo plane showed up unexpectedly at an Israeli airport. The plane, which had filed a flight plan for a trip from Iran to Spain, was listed as missing for three days--until the manager of Ben-Gurion International Airport confirmed that it had landed at Tel Aviv. He said it had experienced “troubles with electricity and communications equipment.”

The plane was traced to International Airline Support Group Inc. of Miami. Seated in the company’s offices before a large map of Saudi Arabia, President Richard Wellman said his firm had sold the plane last July or August--weeks before it showed up in Israel--to a company he identified as International Air Tourism of Nigeria.

“I know nothing” about the African company, Wellman said. His own company, he said, is “just a glorified junkyard. . . . We buy airplanes, cut them up and melt them down.”

In Israel, journalists recall that the crew members of the plane parked for three days in Tel Aviv could not be located for comment. They were reported to be sequestered at the U.S. Embassy.

Around the time of Jenco’s release last summer, according to one source, the Iranians sent an emissary to Washington. His message was that it was becoming politically unsafe for Iranian officials to deal directly with American officials. In response, according to this source, the Administration decided to send McFarlane--now a private consultant--to Tehran.

Tells of McFarlane Arrest

Rafsanjani, in a speech Tuesday, said that McFarlane was arrested at Tehran International Airport as soon as he announced who he was and asked to meet with Iranian President Ali Khamenei. McFarlane and White House officials have refused to comment.

But other reports from Iran suggested that McFarlane was somehow recognized by radical militiamen. According to one unconfirmed account, militants besieged the hotel where he was being held under house arrest.

The story of McFarlane’s trip found its way into a Syrian-sponsored news magazine in Beirut, which suggested that members of Rafsanjani’s faction in Tehran held talks with the American.

Rafsanjani, apparently recognizing the political danger of any link to the United States, quickly denied that account and said he had ordered McFarlane’s arrest.

“Those who think that the Americans have a wise and well-calculated policy and that very capable advisers are gathered in the White House to draw up plans for playing tricks on the people of the world can now see what kind of people they are and how they act in desperation,” he said.

Only then did full accounts of a secret arms supply line appear in the United States--and the muffled debate over the operation burst into public.

‘Net Gain Is Zero’

“The main tenet of the Administration’s policy has been that you don’t make deals with terrorists,” said the Shultz aide who had opposed the operation from the start. “This has knocked the props out from under that. . . . We’ve had three hostages released, sure. But we’ve also had three more taken, by people who appear even less tractable than Islamic Jihad. The net gain is zero.”

But another terrorism expert, Brian Jenkins of Santa Monica’s Rand Corp., saw the damage as less serious.

“Our declared policy (of not making deals) has always been the policy we wish we could adhere to, and do adhere to when we can,” he said. “But the fact is that in our society, the pressure to bring people out safely prevails in the long run. We have made concessions in any number of previous hostage episodes. I don’t think the policy is damaged any more than it had already been damaged.”

Jet Seen at Airport

At about the time of McFarlane’s reported journey to Tehran, an American-registered Boeing 707 cargo jet was seen parked in a remote area of Mehrabad Airport, out of view of the main passenger terminal, according to a pilot who was interviewed by The Times.

The pilot, who asked not to be identified, said the plane was surrounded by armed airport guards who prevented anyone from approaching. But he said it appeared that the craft was being unloaded of munitions. “If it was food,” he said, “there would be no need for such secrecy.”

The plane’s U.S. registration number was traced to Race Aviation, a company with a Burbank address but headquartered in Kansas City, Mo.--reportedly in the basement of the home of Farzin Azima, one of two brothers who came to the United States from Iran in the 1960s and who have been involved in various aviation operations since the 1970s.

Azima, contacted by telephone, confirmed that his company owns a Boeing 707 that once had those registration numbers but denied it was ever in Tehran. “That airport is closed to American traffic,” he said. “We couldn’t be there.”

“We didn’t have the pleasure to take Mr. McFarlane (to Tehran),” he said.

“We wish we had,” he added. “We’d like to be famous.”

Times staff writer William Rempel in Los Angeles and researcher Lorna Nones in Miami contributed to this article.