The scheme began to unravel last October 7. In Managua, the sole survivor of a downed American C-123 cargo plane full of weapons for the contras told a crowded press conference, “My name is Eugene Hasenfus.” In Washington, businessman Roy Furmark called on his old friend William Casey at CIA director’s hideaway office next to the White House. Furmark had been sent by Adnan Khashoggi; the Saudi tycoon said he had not been repaid more than $10 million he advanced for arms shipped to Iran. When Furmark returned to Washington on November 24, Casey phoned Lt. Col. Oliver North at the White House. “There’s a guy here who says you owe him $10 million on the Iran thing,” Casey said. Casey hung up and turned to Furmark. “North says the Israelis or the Iranians owe you the money.”

Of the several key factors underlying the Iran arms scandal, perhaps the least remarked upon is greed. The media is full of pious musings concerning political and strategic calculations, as if the prospect of million-dollar profit margins was merely incidental. Adnan Khashoggi, Ya’acov Nimrodi, Manuchehr Ghorbanifar and Richard Secord are neither statesmen nor philanthropists. They have become rich by selling weapons and paying bribes. Khashoggi was making $2 and $3 million per deal in the Iran shipments — about 20 percent — and he was simultaneously trying to cook up deals supplying Iraq as well. Nimrodi’s and Ghorbanifar’s take was similar. Iran paid $64 million for the shipments arranged through North and Secord. Many millions of these dollars are still unaccounted for. American and Israeli middlemen were involved in separate schemes worth additional billions of dollars.

What’s true for the middlemen is even more true for Israel. Nimrodi put it bluntly: “We have to sell our arms.” Iran before the revolution was purchasing half a billion dollars worth of Israeli goods, mostly arms. Perhaps a third of Israel’s arms export market disappeared with the revolution. Nimrodi and David Kimche, both Mossad veterans, have been central to an Israeli effort to resurrect this market. In 1981-1982, Washington agreed to look the other way while Israel sold weapons with US components and spares to Iran. After 1982, as Iran moved to the offensive in the Gulf war, Washington put pressure on Israel to comply with a broader, tighter embargo.

This effort to starve Iran of weapons and munitions occurred as an increasing number of arms exporters were competing for the rest of the market, which, beginning in 1985, was hurt by the fall in oil prices and general economic contraction. For Israel, the pressure to get back into the Iranian market was tremendous. Iran was at war. Its appetite for ordnance was great and it would pay premium prices. Israel had valuable contacts with Iranian military and intelligence officials. But arms sales to Iran conflicted with US policy. To change that policy would require a political rationale. Thus began the search for Iran’s “moderates.” What was important was not the $64 million involved in the joint US-Israel sales. What was important was to breach the embargo and reopen a market that had once been worth half a billion dollars a year.

The arms trade has long been a source of slush funds, available for buying foreign politicians and homegrown mercenaries. Time was when the CIA would just put a king or a prime minister on its “political action” payroll. King Hussein of Jordan, for instance, took millions of dollars from the CIA over the course of two decades. When disclosure of these direct payments created a furor in the late 1960s, they were rerouted as commissions to foreign arms dealers. Lockheed alone gave Khashoggi some $106 million in the first half of the 1970s. The rampant corruption of the “commissions” channel was exposed in the 1970s, in the wake of Watergate. This led to a third mode of covert payments: padded costs for arms deliveries. The purchasing country bears these costs, but in most cases they are funded by US foreign military sales credits.

Richard Secord, the retired air force general at the center of the Iran-contra connection, went from covert operations in Southeast Asia to managing the huge arms program to Iran and then to being in charge of arms sales to the entire Middle East. He was key in the $8.5 billion AWACS package to Saudi Arabia in 1981. As part of that deal, the Saudis committed themselves to funding various anti-communist insurgencies, to be determined later by the White House. Among the worthy recipients are the Afghan mujahideen and the South African-backed UNITA forces in Angola. When the White House call went out in 1984 for the contras, high Saudi officials asked American companies seeking business to kick in contracts and payments to Secord’s firm, Stanford Technology. Eugene Hasenfus’ $3,000-a-month salary was thus funded.

Beyond the “208 Committee” and other top-secret inter-agency boards running covert operations, there is a network of retired and fired agents and officers with ties to their former “companies.” They subsist, often quite grandly, on sales of weapons and warriors; they consult with insurgents and counterinsurgents. The most significant revelation of this scandal is the extent to which a parallel government, a shadow regime, has grown up in the hidden space between the civilian apparatus of the state and the military.

The shadow government comprises men brought together in the security apparatus of the state. Some, like Oliver North and William Casey, are in the state’s employ. Others, like Richard Secord and Theodore Shackley, have been fired or retired; they work informally and on contract with the state. These are the “cutouts.” They provide officials with “deniability.”

There is an enormous compatibility of ideology and material interest that underlies these collaborations. When the media describe the Iran-contra scandal, they speak of the state turning to the contractors. Oliver North turned to Richard Secord. On the record of these events, though, did no initiative come from those in the shadow? Did the Secords and Shackleys turn to North and to Reagan to help confect a secret war in Central America and arms sales to Iran? The shadow government has turned to the state to legitimize the pursuit of counterrevolution and weapons trade without which this confederacy could not survive. This shadow government is transnational. Its essential components — intelligence operatives, covert actors, and arms merchants — transverse the boundaries of the state. Israel’s pivotal role in this affair is no coincidence. Israel controls the largest inventory of US and US-compatible arms outside of the United States. More important than the compatibility of weapons is the compatibility of ideology and political analysis. Here we see the offspring of the Nixon-Kissinger strategic calculation in the years following the 1967 war. A whole generation of strategists and schemers has come of age having done their tutorials in Kissinger’s basement, thoroughly enamored of Israel’s swashbuckling approach to politics and war. They were prominent among the cheerleaders for Israel’s invasion of Lebanon, and they drafted the orders that sent US troops, warplanes and gunboats there to cover Israel’s partial withdrawal. They will continue to be well represented in Frank Carlucci’s National Security Council.

If Israel did not exist, the shadow government would have to invent it. “It’s like Israel has become just another federal agency,” one Israeli analyst complained, “one that’s convenient to use when you want something done quietly.” In fact, Israel is available for roles that no federal agency could fulfill. The state of Israel is a corporate “cutout” for empire headquarters in Washington.

Israel’s price, though, is not just guns and money and good PR. Israel wants to be the exclusive agent for any important imperial dealings in its territory — the Middle East. Israel does not just want a piece of the Iran arms market. It also insists on being the interlocutor in any US dealings with Tehran. Israel has gotten used to playing a large role in shaping US assessments of developments in the region. Israel is desperate to be indispensable.

This issue offers commentary on various aspects of the Iran-contra scandal, and situates it in the context of the growing militarization of the Middle East region. Upcoming issues will feature more detailed accounts of this affair and its consequences.

How to cite this article:

The Editors "From the Editors (January/February 1987)," Middle East Report 144 (January/February 1987).

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