Criticism of U.S.-Iran Deal Grows : Report Shultz May Quit Is Disputed by State Dept.

The Reagan Administration came under new criticism Sunday from both congressional leaders and foreign allies, who charged that the White House acted improperly when it swapped arms shipments to Iran for American hostages in Lebanon.

Arab diplomats, echoing similar complaints from European countries, said their governments are upset by the discovery that the Administration has been secretly sending military hardware to Iran while pressuring other countries to halt their arms sales to the Tehran regime.

“This country has always declared openly that it would not negotiate with terrorists,” Jordanian Ambassador Mohammed Kamal said in an interview. “Now it has lost credibility.”

Attacked by Byrd

The leader of the Senate’s new Democratic majority, Sen. Robert C. Byrd (D-W.Va.), criticized the Administration for hiding the operation from Congress by using the National Security Council staff to run it.

The outgoing chairman of the Senate Foreign Relations Committee, Sen. Richard G. Lugar (R-Ind.), said he also was troubled that the arms-for-hostages deal was run by the NSC over the objections of Secretary of State George P. Shultz.

Shultz, who reportedly opposed the hostage deals from the time they were first discussed in 1985, remained publicly silent. But a State Department spokeswoman, Sondra McCarty, said a published report that he might resign over the issue was “pure speculation.”

“He should not resign,” said Lugar, who spoke with Shultz on Saturday. “In my judgment, he will not resign. And, at least in the conversation I had with him--it touched a lot of other subjects--he sounded very lively.”

In Difficult Position

The secret arms deal put Shultz in an especially difficult position, State Department officials said, because he has spearheaded the Administration’s effort to cut off Iran’s access to Western weaponry for its war with Iraq. On Oct. 1, one aide recalled, Shultz met with Arab foreign ministers at the United Nations and assured them that the United States was doing its best to stop arms shipments to Tehran.

“He’s been vociferous about it,” the aide said, “not just to the Arabs, but particularly to the Europeans, who were the ones who wanted to sell the arms.”

Besides Jordan, diplomats from three other friendly Arab countries said Sunday that their governments are upset over the dealings with Iran, but they said they could make no public comment.

‘Damage Control’ Operation

Officials said the State Department has launched a “damage control” operation to try to reassure friendly countries that they were not told lies. But the drive has been hobbled, one aide said, by the fact that “we don’t know what was going on ourselves.”

Sources familiar with the operation said Shultz and a few senior State Department officials were aware that the arms shipments were under way but--because of their opposition--were cut out of the negotiations with Iran and insulated from detailed knowledge of the deals.

Lugar said on ABC’s “This Week With David Brinkley” that he has asked Shultz about that. “I think the secretary of state ought to be heavily involved,” he said. “This is one query that I had to him which he could not respond to: Why aren’t you right into the thing and trying to help shape it?”

Both Byrd and Sen. Sam Nunn (D-Ga.), the senior Democrat on the Senate Armed Services Committee, said they intend to investigate President Reagan’s decision to put the arms deals in the hands of the National Security Council staff. Several sources have said Reagan put the NSC in charge because, as an arm of the President’s personal staff, it is not required to report to Congress--unlike the CIA and other government departments.

Circumventing Congress

“I think they’re attempting to circumvent the Congress,” Byrd said on NBC’s “Meet the Press.” “They’re trying to avoid coming up and explaining what’s going on. I think this is a serious mistake, and I think we ought to take a look at the law. Perhaps the laws ought to be changed (to require the NSC to report to Congress).”

“We have some profound legal inquiries as to whether any laws have been violated,” Nunn said on the ABC program. “And we really have another question: that is the decision-making process in this Administration. In an effort to cut Congress out, have they also cut out the CIA, the Joint Chiefs (of Staff), the State Department and Defense Department? And if so, who’s making the decisions?”

Several officials said the Administration has increased its reliance on the NSC staff for such secret operations not only in Iran but also in Central America, where a private aerial supply network for Nicaraguan rebels was organized with encouragement from a NSC aide, Col. Oliver L. North. The secret air operation was exposed because Nicaraguan troops shot down one of the supply planes last month, capturing an American crewman.

Comes to Grief

One senior State Department official expressed personal admiration for North, who also supervised the secret arms shipments to Iran. But he charged that the operations have come to grief because the NSC staff is ill-equipped for the job.

“They don’t know what they’re doing over there,” said the aide, who spoke on condition that he not be identified by name. “And even if they did, the NSC doesn’t have the resources to run this kind of thing.”

David Aaron, a former NSC aide who served during the Carter Administration, said he fears that using the White House staff for secret operations will lead to unwelcome congressional oversight. “I think it’s very important that (the NSC) reserve itself to the coordination of policy,” he said on PBS’ “McNeil-Lehrer News Hour.”

“Once it becomes operational . . . I think that the NSC will become vulnerable to political opposition,” Aaron said.

‘No Serious Legal Issue’

Richard V. Allen, Reagan’s first NSC chief, disputed that view. “The President can pick anyone he likes to carry out his policies,” he said in an interview. “It can be CIA or State Department or NSC. . . . There’s no serious legal issue here.”

NSC aides have often been used for clandestine diplomacy in the past, from the Administration of Richard M. Nixon, who sent Henry A. Kissinger secretly to Peking, to that of Jimmy Carter, who used the NSC for his own hostage negotiations with Iran.

But several former NSC aides said they could not recall any past instances when the council staff had actually organized logistical details of clandestine operations, as North appears to have done in both Nicaragua and Iran. “That’s just unworkable,” said one.

Wisdom Still Debated

Meanwhile, debate continued over the wisdom of the Administration’s basic decision to allow U.S.-made military hardware to reach Tehran in exchange for help in freeing hostages held by pro-Iranian terrorists in Lebanon.

The secret operation, which began early in 1985, helped gain the release of three American captives, but it contradicted the Administration’s policy of refusing to make deals with terrorists.

“To negotiate for hostages makes it more likely that other hostages are going to be taken,” former Secretary of State Kissinger said on ABC. “To trade arms--in a war in which a victory of Iran is against our national interest--is unwise. Above all, I’m deeply concerned about announcing one policy in public, pressuring other countries to follow it, and then, in private, carrying out another policy.”

Allies Reportedly Told

Sen. Lugar said that Adm. John M. Poindexter, the current NSC chief, assured him that the Administration had informed its allies of the secret operation. “I can’t enumerate the countries, but I would say that we have told our allies, and they include Middle Eastern countries who would be affected,” Lugar said.

But European officials said last week that they had not been informed of the operation, and the ambassadors to Washington of several pro-American Arab countries said Sunday that their governments were also taken by surprise.

Ambassador Kamal of Jordan said that even if the Reagan Administration was concerned about the lives of U.S. hostages, prolonging the war through arms shipments to Iran could cost “tens of thousands of lives and this great country should not contribute to this.”

‘Can Name Their Price’

And he said that disclosure of the secret bargaining will only make it easier for terrorists in the future. “All they have to do is hijack an airplane or take hostages and they can name their price,” the ambassador said.

Egypt’s Ambassador Abdel Raouf Reedy, whose government is also allied with the United States, said he could not respond to the question of whether his government had been aware of the secret flights. “It could be embarrassing,” he said.

“All the Arab ambassadors have been in to ask what in hell was going on,” a State Department official said. “We haven’t been able to tell them much. The worst possible case would be if any commitment had been made to open up a pipeline to supply arms to Iran. But if it was a matter of simply making a few discreet deliveries, as an exceptional few acts relating to the hostages, we think we--and they--can live with that.”