Iran-Contra Affair (1985-1987): Arms, Hostages and the Contras

The Iran-Contra affair was a political scandal in the United States in which officials of the Reagan administration secretly sold arms to Iran and used part of the proceeds to fund the Contra rebels in Nicaragua. The operations ran from 1985 to 1986 and became public in November 1986. They broke an arms embargo, defied a congressional ban on aid to the Contras, and led to the most serious crisis of Ronald Reagan’s presidency.

Background: hostages and the Contras

Two separate problems lay behind the affair. In Lebanon, groups linked to the Iranian-backed Hezbollah had kidnapped several Americans, including the CIA station chief in Beirut, William Buckley, in March 1984. Iran, at war with Iraq since 1980, badly needed American-made weapons and spare parts for its arsenal, much of it bought before the Iranian Revolution.

Officially, the United States refused to sell arms to Iran, which it classed as a state sponsor of terrorism, and campaigned to stop its allies from doing so. Memories of the Iran hostage crisis also made any deal politically toxic.

In Central America, the administration backed the Contras, rebels fighting the left-wing Sandinista government of Nicaragua. Congress, worried about another open-ended intervention, passed the Boland Amendments, and the version enacted in October 1984 barred US agencies involved in intelligence from spending funds to support the Contras militarily.

Arms for hostages

In August 1985, with US approval, Israel shipped 96 TOW anti-tank missiles to Iran, followed by 408 more in September. One hostage, the Reverend Benjamin Weir, was released. A shipment of HAWK anti-aircraft missiles in November 1985 went badly wrong and was largely returned.

On 17 January 1986 Reagan signed a secret presidential finding authorising direct sales by the United States. Secretary of State George Shultz and Defense Secretary Caspar Weinberger had opposed the initiative. The CIA bought weapons from the Pentagon, and a private network run by retired Air Force General Richard Secord and the businessman Albert Hakim, known as “the Enterprise”, handled delivery and payment at heavily marked-up prices.

In all, more than 2,000 TOW missiles and spare parts for HAWK systems reached Iran. In May 1986 former National Security Adviser Robert McFarlane flew secretly to Tehran with North, but the mission failed. Three hostages were freed during the operation, but other Americans were kidnapped in Lebanon in the same period.

The diversion to the Contras

Lieutenant Colonel Oliver North, a National Security Council staff officer, had already organised private funding and supplies for the Contras after the Boland ban. He used the Enterprise to channel money from the Iranian sales to them, with the approval of National Security Adviser John Poindexter.

According to the independent counsel’s final report, the arms sales generated about 47 million dollars, of which at least 3.8 million can be shown to have gone to the Contras; much of the rest stayed with the Enterprise. Funds were also raised from foreign governments and private donors. A gift of 10 million dollars from the Sultan of Brunei was famously deposited in the wrong Swiss bank account because of a mistyped account number.

Exposure and investigations

On 5 October 1986 a cargo plane carrying supplies to the Contras was shot down over Nicaragua. The surviving crewman, Eugene Hasenfus, told his captors that he believed the supply operation was run by the CIA. On 3 November the Lebanese magazine Ash-Shiraa revealed McFarlane’s trip to Tehran.

Reagan first denied that the United States had traded weapons for hostages, in a televised address on 13 November. On 25 November Attorney General Edwin Meese announced that profits had been diverted to the Contras. Poindexter resigned, and North was dismissed after he and his secretary had shredded large numbers of documents.

Reagan appointed a review board under former Senator John Tower, with Edmund Muskie and Brent Scowcroft. Its report of 26 February 1987 criticised the president’s hands-off management and the NSC staff’s freelancing. On 4 March 1987 Reagan accepted responsibility, saying that his heart told him he had not traded arms for hostages, but that the facts and evidence told him it was not true.

Joint congressional committees held televised hearings from May to August 1987. North’s testimony in uniform in July made him a celebrity for some viewers and a symbol of contempt for the law for others. The committees’ majority report concluded that the president bore ultimate responsibility.

Independent counsel Lawrence Walsh, appointed in December 1986, charged 14 people, and 11 were convicted. The convictions of North and Poindexter were overturned on appeal because their testimony to Congress had been given under immunity. On 24 December 1992 President George H. W. Bush pardoned six people, including Weinberger before his trial.

Consequences

The scandal hit Reagan’s standing hard. His approval rating, around 67 per cent before the revelations, fell to about 46 per cent within weeks in a New York Times/CBS News poll. Chief of Staff Donald Regan was replaced by former Senator Howard Baker in February 1987, and Frank Carlucci, as the new National Security Adviser, restructured the NSC staff and stopped it from running covert operations.

The affair also slowed Reagan’s agenda for much of 1987, although he recovered politically through his arms-control diplomacy with Mikhail Gorbachev. Questions about what Vice-President George H. W. Bush had known followed him into the 1988 presidential campaign, which he nevertheless won.

In Central America, Congress restricted Contra aid to non-military supplies from 1988. Regional peace efforts led by Costa Rica’s president Óscar Arias gained ground, and the Sandinistas lost free elections in February 1990. Walsh’s final report, published in January 1994, concluded that senior officials had broken the law and that some had engaged in a cover-up, though no one served a prison sentence for the core decisions.

A common belief is that the money from Iran paid for most of the Contra war. In fact the diverted sums were modest; the Contras relied more on earlier CIA funds, foreign donations and, from 1986, renewed aid voted by Congress. Another misconception is that the hostage releases proved the deal worked: three hostages were freed, but new ones were taken, which critics saw as evidence that paying for hostages encouraged more kidnappings. The episode is also sometimes remembered as a single plot, but investigators described two linked operations, the Iran initiative and the Contra supply network, that came together through the same small group of officials.

Key people

• Ronald Reagan: approved the arms sales; denied knowing of the diversion.
• Oliver North: NSC officer who ran the operational side.
• John Poindexter: National Security Adviser from December 1985; approved the diversion.
• Robert McFarlane: National Security Adviser until December 1985; led the Tehran mission.
• Lawrence Walsh: independent counsel whose investigation lasted until 1993.

Timeline

• 1984, October: The strictest Boland Amendment bans military aid to the Contras.
• 1985, August: Israel ships the first TOW missiles to Iran with US approval.
• 1986, 17 January: Reagan signs a finding authorising direct arms sales to Iran.
• 1986, 5 October: A Contra supply plane is shot down over Nicaragua.
• 1986, 3 November: Ash-Shiraa reveals secret US dealings with Iran.
• 1986, 25 November: Meese announces the diversion; Poindexter resigns and North is fired.
• 1987, 26 February: The Tower Commission reports.
• 1987, 5 May – 3 August: Joint congressional hearings.
• 1992, 24 December: President Bush pardons six defendants.

Why it matters

Iran-Contra raised lasting questions about secret foreign policy, the power of the National Security Council staff and the limits of presidential authority over Congress. It took place against the background of the Iran-Iraq War and US rivalry with the Soviet Union in Central America. Reagan’s popularity fell sharply but recovered, and the affair remains a key case in debates about accountability in government.