November, 1986. A Lebanese newspaper reported that the United States had sold arms to Iran via Israel in violation of an embargo. The purpose? To secure the release of six U.S. hostages. Funds from the illegal transaction would later be used to fund anti-communist insurgents, the Contra rebels, in Nicaragua.

A scandal had broken. What remained was to determine who the U.S. players were. Certainly, senior American officials were involved. Did Secretary of State Shultz know? Did President Reagan know?


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After the sales were revealed, President Reagan appeared on television to admit the weapons transfers had taken place, but denied that the U.S. had traded arms for hostages. Meanwhile, members of Reagan’s administration set about to destroy documents relating to the affair.

“Given the passion Shultz has invested in the principle of not dealing with terrorists, he may now feel like resigning not because he was responsible for what was done, but because he was not…”
~ George Will

As the scandal continued to unravel, Reagan returned to television to take full responsibility for any actions that he had not been aware of. He said: "what began as a strategic opening to Iran deteriorated, in its implementation, into trading arms for hostages." (March 1987 Speech). A number of investigations were then set in motion, including those by Reagan’s Tower Commission and by Congress.

In the Dark

Secretary Shultz always maintained that he was in the dark about Iran-Contra, at least up until the scandal broke. Historians and investigations in the years following the event support his claims. Indeed, as Shultz described it, not knowing about such a major foreign policy decision was, humiliating. He cites George Will’s interpretation of events in the Washington Post during the time:

“George Will’s column in the Post that day dealt with me: ‘Given the passion Shultz has invested in the principle of not dealing with terrorists, he may now feel like resigning not because he was responsible for what was done, but because he was not…’ There was truth in that. My past position—being cut out—was, if humiliating, explicable in terms of my not knowing what took place; my present position—being cut out of what the president was treating as a major American foreign policy effort—was not sustainable. I would have to get the president to see that grave mistakes were being made, get control over the mess, or go.” (T&T, p. 818.)

Could Shultz get control over the mess?

Shultz’s opposition to any arms-for-hostages deal was evidently predictable to his detractors in the White House and likely solidified his systematic exclusion from the Iran-Contra dealmakers from the outset. Subsequent clashes with the National Security Council (NSC) and the CIA would either cost Shultz his job or regain him both the respect and the ear of the President—that is, if the dust would only settle.

All the while, Reagan was dealing with a weakened presidency and a damaged reputation. There also remained the critical point of tension between Shultz and Reagan over the arms-for-hostages deal that might have meant the end of Shultz’s career. So, after making his position very clear to the president, Shultz decided to take things public. He made his opposition to arms for hostages explicit on television:

“I felt I had done as good a job as possible for the president. But I had thrown down the gauntlet in my final exchange. I felt I had to do it. Now it was up to the White House to respond.” (T&T, p. 823)

On Negotiating with Terrorists


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He also made it clear that he was not unified with other administration officials and that he expected to be ousted as a result. But shortly after his appearance, Shultz got good news: A White House spokesman announced that the president had no plans to send further arms to Iran. The president and the secretary are in “complete accord on this,” added the spokesman. (T&T, p. 823)

Shultz refused to participate in any cover-up and he remained unwilling to compromise on what he knew to be both morally and factually correct. But his unwillingness to compromise was not an unwillingness to practice diplomacy:

“I telephoned Don Regan: stop the NSC staff effort; transfer the president’s policy as stated in his speech to me, and I will try to put our policy and our behavior back together, I said…I knew that I was engaged in all-out diplomacy with my own president and his administration, aimed at getting the authority to do the job I had been hired to do. Everything now depended on getting the arms-for-hostages operation stopped and getting the policy as a whole under control and back to the State Department.” (T&T, p. 819).

Shultz contrasts this situation with his time as Nixon’s Treasury Secretary in which he had resigned: “[T]his time I wasn’t going to drop out. I would fight to get the Reagan presidency back on track, and if I couldn’t, I’d go. No successor could function in this job, I felt, unless this terrible situation was put right.” (T&T, p. 820).

Following a disastrous press conference on November 19, Reagan finally turned to Shultz for support. Reagan, however, was still in denial about any wrongdoing: “The president, Don [Regan] said, ‘just doesn’t realize it’s a problem. He says, ‘Gee, we didn’t do anything wrong.’ So you have to convince him.” (T&T, p. 832) Shultz and Don Regan were determined to set the president straight. It would take time, however, to convince the president that the problem was not with the press, but with the policy. By November 24th calls began for Shultz’s resignation. The calls came mostly from within the White House: “It’s like I’m the baseball manager and the team is losing,” I said. “So they want to get rid of the manager” (T&T, p. 837).

Then, in a sudden shift, National Security Advisor John Poindexter unexpectedly handed over Iran policy to the State Department. Shultz recalls: “Something dramatic must have happened. What, I did not know. I could not believe that Poindexter had simply had a change of heart or was putting this issue aside in order to attend to other matters. I was mystified but elated…”On Tuesday, November 25, the president called a National Security Planning Group meeting in which Ed Meese delivered explosive news: funds from the sale of arms to Iran had been diverted to support the Contra rebels in Nicaragua. This news would made matters worse for the President. So those responsible would have to fall. National Security Advisor Poindexter and Oliver North – who had been at loggerheads with Shultz on the issue – were both out.

By the end of 1986, with Poindexter and North out of the picture and armed with more information, Shultz felt that he was finally getting things under control. And by early January, 1987, Shultz noticed a humbler Ronald Reagan. In that humility, Shultz found an opportunity to rekindle their relationship and help rebuild Reagan’s presidency.

On Iran-Contra issues, Reagan was finally taking a more active role. During these times, he sent Shultz a memo about Iran-Contra: “This was a presidential initiative to me about ideas that had merit and showed movement on key issues. I took this as a sign that Ronald Reagan was reengaging after a period of demoralization as the Iran-Contra issues unfolded and his own popularity with the American people sagged—that he wanted me to know he was relying on me, reestablishing his relationship with me on substantive issues.” (T&T, p. 864)

Sensing Reagan’s renewed warmth, Shultz seized the opportunity to challenge the intelligence community directly through Poindexter’s replacement Frank Carlucci and CIA director Robert Gates. Getting the intelligence agencies out of influencing policy was crucial to Shultz regaining control on foreign policy matters.

John Tower, Ronald Reagan and Edmund Muskie
discussing the Tower Commission Report and
investigation into the arms for hostages scandal

Shultz told Carlucci: “I invited Carlucci to my home…where we had a lengthy and frank talk about the substance and procedures in foreign policy. I told him that I had no confidence in the intelligence community, that I had been misled, lied to, cut out. I felt that CIA analysis was distorted by strong views about policy…” (T&T, p. 864)

Shultz told Gates: “I feel you all have very strong policy views. I wouldn’t trust anything you guys said about Iran no matter what. I feel you try to manipulate me. So you have a very dissatisfied customer. If this were a business, I’d find myself another supplier… the intelligence community is not a constructive part of my life; it is a problem. It is telling the president things that I’m not aware of and that I don’t trust.” (T&T, p. 865-866)

Despite gains with the president, Reagan still did not seem to comprehend the depth of the situation. “A big problem was that President Reagan kept saying—and he truly believed it—that we had not traded arms for hostages. I had to keep trying to make him realize that indeed we had. The president had completely buffaloed himself about this matter. Conducting the business of the U.S. government in early 1987 was like swimming against a powerful tide.” (T&T, p. 868)

Then, on the last day of January 1987, a journalist was taken hostage in Iran. Reagan allowed Shultz to handle the situation. Without breaking the law, Shultz would show them how it’s done by dealing with the Iranians privately. His plan was to downplay the importance of the hostage, and emphasize to Iran that they would lose far more than they could gain by holding hostages:

“The key was quiet, patient work to ‘lower the value and raise the costs of taking and holding hostages,’ I said. That strategy is tough to follow in a free and open society. Politicians must learn how to handle the inevitable pressure to ‘do something,’ and the population at large and the media must appreciate the importance of raising costs to terrorists and to denying them gain and massive publicity from their actions.” (T&T, p. 857)

The journalist was released on February 4th. Shultz had won the day and the renewed confidence of his president.

March arrived and Reagan was due to give his first press conference of the year. Iran-Contra was still the elephant in the room.

“I was worried about how the president would do in his first televised press conference of the year,” recalls Shultz. “I need not have been. He turned a corner: he admitted that his policy had deteriorated into a trade of arms for hostages, accepted ’full responsibility’, renounced his Iran initiative, and barred a recurrence.” (T&T, p. 877)

In many respects, Shultz’s guidance helped to save Ronald Reagan’s presidency. Subsequent investigations would heap fourteen administration officials with charges. Eleven were convicted, including Secretary of Defense Casper Weinberger. Secretary of States Shultz not only kept his job and was not charged, but would go on to forge a relationship with Ronald Reagan that would enable them to get beyond the affair and hasten the end of the Cold War.

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