BOOK MARK : The CIA Paid Its Israeli Spies With Money From ‘Under the Mattress’

If there were countries where the Central Intelligence Agency found it hard to gain access, or particular activities the agency preferred to leave to someone else, the Mossad could take on the job. The CIA’s internal code name for this operation was KK Mountain.

The CIA was and is in the habit of handing out “subsidies” to friendly foreigners. King Hussein of Jordan was on the payroll from 1957 to 1977, to the tune of several hundred thousand dollars a year. He got his money through the CIA’s Near East Division.

KK Mountain was different. The Israelis got their money straight from the top. In addition to the normal agency operating budget, the CIA director had his own special contingency fund, money that could be released on his signature alone. “It was basically money under the mattress,” one former high-ranking official recalls. “It would normally only be called on for some super-secret operation where you needed a lot of money fast. KK Mountain was the exception. Year after year, that money would be in the fund for Israel. You have to remember that the relationship wasn’t as open as it is now. Paying the Israelis to do operations for us was a very sensitive subject.”

According to cognizant former officials, KK Mountain had a budget of between $10 million and $20 million a year during the 1960s. “That was quite a big item,” remembers one.

“The whole agency budget was only $650 million at the end of the 1960s, and we were fighting a war in Southeast Asia at the time. Of course, the Israelis were making extra money on the deal, too, above and beyond what they got from the fund. To get the total figure, you would have to include whatever money was generated by proprietaries (commercial companies, possibly profitable, secretly owned by an intelligence agency), which could have been a whole lot more.”

One such example of a U.S. subsidy for Israel was the way in which the “Reynolds Construction Co.” garnered multimillion-dollar contracts to build secret communications-intelligence facilities in Iran and Turkey, as well as five airfields in Ethiopia. Reynolds was in fact secretly owned by the Israeli Labor Party through its trade-union organization Histadrut. To qualify legally for U.S.-taxpayer-funded projects such as these, the Israelis had bought the charter of the defunct Reynolds Ball Point Pen Corp. and submitted the bids under that name. The legal work required was performed by Clark Clifford, who had done yeoman service on behalf of Israel as a political aide to President Harry S. Truman.

Turkey, a non-Arab Muslim country in the good graces of the Americans, was an important catch for the Israeli “peripheral” strategy. Iran, however, as a non-Arab, oil-rich Muslim country regarded by the Americans as a key asset, fit even more perfectly into the scheme.

Israeli agents had been at work encouraging friendly forces in Iran since the early days of the state. In June, 1950, for example, Iran had recognized Israel “de facto” (a diplomatic concept meaning something just short of full relations).

This act of friendship from the land of Cyrus the Great, who had freed the ancient Jews from Babylonian captivity, was the subject of much sentimental commentary in later years. The real reason for the recognition was more prosaic. The prime minister at the time was Muhammed Saed. Like many political leaders the world over, Saed had his “silent” partner to handle the business side of a statesman’s affairs. This partner, a merchant in the bazaar, was approached by an American, who is referred to in the Israeli state archives only as “Adam.” Acting on behalf of the Israelis, Adam wanted to know what it would take for Iran to recognize Israel. Saed’s answer was short and to the point: $400,000.

This was an enormous sum for Israel at that time, and for a while the Cabinet balked at the price. Some purer souls in the Israeli Foreign Office protested the use of corrupt means to extend Israel’s influence.

Adam, however, proceeded on his own initiative and handed over a down payment of $12,400 to the prime minister’s bagman.

Saed kept the bargain. He immediately began to talk to the powerful religious leaders about the need to distinguish between global politics and religion. He then restocked the Cabinet to ensure complaisance and obtained the shah’s authorization. The Israelis, moral qualms subdued, found the rest of the $400,000, and a 30-year relationship began.

However much the wheels of diplomacy might have been greased, the connection between the shah’s Iran and Israel rested on firm foundations. The two countries shared a dislike of the Arab nations on their borders. Both had strong connections to the United States, in particular the CIA. Each had something the other needed. In Iran’s case, it was oil, which it began to ship to Israel in 1954. Israel could offer valuable expertise in the fields of intelligence, defense and domestic security.

In the eyes of the shah, Israel had something even more valuable to bestow on its friends: the pervasive influence of the Jews in the United States and indeed the world over. Chaim Herzog, now president of Israel, who had many dealings with the Iranian monarch while head of military intelligence, later said that his majesty saw every Israeli as a link to Washington.

For the Iranian regime, the United States was the indispensable ally. The CIA (with considerable help from the British) had ousted the national Mossadegh government in 1953, and put the shah back on his throne.

Following the success of the coup, the United States rewarded its client with a copious flow of economic and military aid. In return, it had not only the benefit of a loyally anti-communist ally between the southern border of the Soviet Union and the Persian Gulf, but also a regime disinclined to challenge Western oil interests in the country.

1991, Andrew and Leslie Cockburn. Reprinted with permission from HarperCollinsPublishers.

BOOK REVIEW: “Dangerous Liaison: The Inside Story of the U.S.-Israeli Covert Relationship,” by Andrew and Leslie Cockburn, is reviewed on Page 5 of today’s Book Review section.