Analysis : Chief Foe of Deal : Shultz Plays Hardball in Arms Dispute

Secretary of State George P. Shultz, a usually bland bureaucrat with a reputation for loyalty to the boss, has abruptly revealed another side of his nature, showing President Reagan and his public relations-conscious White House aides that he can play political hardball when he wants to.

While his tenure at the State Department is increasingly uncertain, foreign policy and political analysts agree, Shultz has raised the price of his removal by carefully avoiding direct criticism of the President but making himself the chief opponent of the now-controversial plan for shipping arms to the Tehran mullahs.

And whatever the outcome, one high-level State Department official said the secretary of state is ready to live with the record of what he did and what others did in the most serious crisis of the Reagan Administration.

In the most open demonstration of his strategy, Shultz sent his deputy, John C. Whitehead, to Capitol Hill on Monday to contradict Reagan’s assertion that Iran ended its support of terrorism after receiving U.S. weapons. Whitehead said there is evidence that Tehran remains a terrorist regime.

His testimony, which State Department officials said was cleared by Shultz, gives Reagan ample grounds to dismiss the secretary of state. But, in effect, if Reagan now fires Shultz, he will have to vouch for the good behavior of the Ayatollah Ruhollah Khomeini and his associates, clearly a risky position.

Shultz has a justified reputation for keeping his own counsel. He may yet decide to quit without any more fuss, but his senior aides are talking as though he has decided to fight for his principles.

One official said that Shultz, the Administration’s most outspoken advocate of a tough line against terrorism, will have a hard time explaining to moderate Arab states and Washington’s European allies why the U.S. government sent arms to Iran.

And the task will be made even more difficult by the fact that, only two months ago, Shultz assured the foreign ministers of the Persian Gulf Arab states that the United States was doing all that it could to stem the flow of arms to Tehran.

But the official said, “You need the best person to explain the policy.” Under the circumstances, he added, Shultz was that man.

The ambassador of a North Atlantic Treaty Organization country said that Shultz’s credibility already has been seriously damaged by the incident. But he added that, if the secretary of state was fired, the impact on Washington’s allies would be even more severe.

William Quandt, a senior fellow at the Brookings Institution in Washington, said that moderate Arab states have had doubts about Shultz for several years, but “the fact that he seems to have been opposed to the (Iran) policy does not hurt him in their eyes.”

Most Important Player “Objectively, on the central issues, Shultz is still the most important foreign policy player,” Quandt, a former National Security Council staff member, said. “If the President wants him to stay, I think he can still function. A month from now he could be as effective as he was before on arms control, trade, Japan, NATO and other matters. This Iran situation has been a relatively marginal initiative.”

Nevertheless, the way Shultz sought to distance himself from the President is in sharp contrast to the action of Defense Secretary Caspar W. Weinberger, another Cabinet member who unsuccessfully urged the President not to send arms to Iran.

The defense secretary has not even given his aides advice on how to respond to the issue and has not told them directly what his thinking is on the issue. However, Pentagon officials let it be known that Weinberger once wrote “Absurd” on a memo advocating secret diplomatic overtures toward Tehran.

“He’s very discreet. He did not want anything about himself to enter into this story,” one Pentagon official said. “He didn’t want anyone to portray him as the wise man who opposed the policy. Since it isn’t a major Defense Department responsibility, he could live with the situation that his advice wasn’t taken.”

The official pointed out that Shultz “has a large bureaucracy that doesn’t like getting its instructions from the White House on any foreign policy matter. (The State Department officials) see this as a bureaucratic opportunity for the organization, and Shultz has to lead the State Department, and therefore he had to distance himself a little bit from the people at the White House and make that clear to protect his role as head of the department and get the support of the people who work for him.

“But Shultz also is a person who likes power and likes to be in charge, and there’s a little bit of a power play on his part. He saw an ‘I told you so’ opportunity. He couldn’t quite resist the classic Washington power play of using this to get the President to reconfirm his support for him and give him more authority.”

‘The Knives Are Out’ A mid-level Pentagon official added: “I don’t think Weinberger has his own agenda. I think Weinberger truly does believe he serves the President. He would no more go on a TV show and do what Shultz did as fly to the moon. The knives are out with everyone, except for Weinberger, who’s been a real gentleman. How George Shultz thinks he can duck is beyond me.”

Shultz served for almost 5 1/2 years in former President Richard M. Nixon’s Administration, resigning his post as Treasury secretary only four months before Nixon’s own resignation.

Shultz was never tainted by the Watergate scandal. Nixon was heard on a tape recording of a White House meeting as calling Shultz “a candy ass” for refusing to give Nixon the income tax records of his opponents.

Although refusing to hand over the records, Shultz did not go public with the White House effort to make improper use of tax returns. Once the matter came to light, however, Shultz made it clear which side he had been on in that Administration’s internal debate.

Times staff writers James Gerstenzang and Gaylord Shaw contributed to this story.