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EXHIBIT EM-27

UNLOR SECRETED

11/17/86 2000
(Maximum Version)

U.S./IRANIAN CONTACTS AND THE AMERICAN HOSTAGES

From the earliest months following the Islamic revolution in
Iran, the U.S. Government has attempted to reestablish official
contact with that government in order to discuss strategic
developments in that critical part of the world and to try and
reestablish a constructive working relationship. Even before
President Reagan came to office the U.S. Government agreed to
expand security, economic, political, and intelligence
relationships at a pace acceptable to Tehran. In the fall of
1979, the U.S. undertook three secret missions to Tehran:

When these meetings and the secret November 1, 1979 meeting in
Algiers, between Brzezinski and Prime Minister Bazargan, became
public in Iran, they precipitated the takeover of the U.S.
Embassy by radical elements and led to the resignation of the
Bazargan government. These events have adversely influenced
Iran's subsequent willingness to engage in any direct contact
with the USG.

Despite mutual difficulties involved in re-establishing normal
relations, our strategic interests in the Persian Gulf sandate
persistent efforts on our part to try to establish a dialogue.
In this regard, it is notable that only a few major countries
do not have relations with Iran ·· Egypt, Jordan, Morocco,
Israel, South Africa, and the United States. Even Iraq continues
to have diplomatic relations with Iran.

Iran, the key to a region of vital importance to the West, is
increasingly threatenedy growing-Soufuli.military-and-galitical
influence long its beriles and insid

course of last two years, the Sovičča zag that surrogatet
have moved motively to gaffatluence in the ul££

The Sovieta believe that once Khomeini dies, they will have
an excellent opportunity to influence the formation of a
government in Tehran which serves Soviet strategic interests
in the area.

The increasing desperation brought on by the costs of the Iran-Iraq
war has exacerbated Iran's vulnerability to Soviet influence.
Moreover, Soviet designs in Afghanistan, pressure on Pakistan,
and actual crossborder strikes in Iran from Afghanistan have made
reopening a strategic dialogue increasingly important.

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In short, the Soviets were far better positioned to significantly
improve their influence in the region in 1985 when we were
presented with an opportunity to open a dialogue with Iran.
deciding to exploit this opening, we evaluated previous efforts
through more conventional channels which had not succeeded.
Since 1993, various countries have made overtures to the U.S. and
Iran in an effort to stimulate direct contact.

About two years ago, senior Iranian officials apparently decided that some accommodation with the U.S. was necessary. However, internal splits and debates made it difficult for them to respond to these overtures.

Numerous individuals and private parties have likewise attempted to be helpful as intermediaries in establishing contact in Iran or in seeking Iranian assistance in the release of our citizens held hostage in Lebanon. I

In 1985, a private American citizen (Michael Ledeen) was approached by a representative of the Israeli government (David Kimche), who reported that they had established a liaison relationship with an Iranian expatriate (Manuchehr Ghorbanifar) in Europe who sought Israeli help in establishing contact with the U.S. Government. In acknowledging the need to demonstrate the bonafides of the officials involved, he (Ghorbanifar) indicated that his sponsors in Tehran could also help to resolve the American hostage situation in Beirut.

The Israelis analyzed this intermediary's background exhaustively in order to validate his legitimacy. This analysis led them to have extremely high confidence in his standing and genuine relationship to the highest Iranian officials. Based in large part upon the Israeli evaluation and in recognition of the clear U.S. interest in a dialogue that night, over time, lead to the moderation of Iranian policies, the U.S. established an indirect contact with the Iranian intermediary in mid-1985, through the private U.S. citizen and a senior Israeli official. These contacts were established through the National Security Council staff with the full knowledge of appropriate Cabinet officers. From the very first meeting with the Israelis and the Iranian, it was emphasized that the USG could not proceed with direct contact unless Iran renounced terrorism as an instrument of state policy.

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In June of 1985, in the midst of the TWA-847 hijacking, the Israeli officials in direct contact with the Iranian expatriate asked him to use his influence with senior Iranian officials to obtain the release of the hijacked passengers. Two days after this approach, four Americans held separately from the rest of the hijacked passengers were freed, and turned over to Syrian

authorities.

Speaker Rafsanjani, who was travelling in the mid-east at the time, and Iranian Foreign Minister Velayati both intervened with the captors. Rafsanjani, in his speech on November 4, 1986, for the first time publicly acknowledged his role in this matter.

proceed less

In September of 1985 the Israelis advised that they
to achieving a ta tahrough in their

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U.S. had long been aware of Israell efforts to maintain discreet
contact with Iran and to providu"Badman assistance in its war
with Iraq. Despite long-term U.S. efforts to convince the
Israelis to desist Israel continued to provide limited military
and industrial technology to Iran. The USG judged that the
Israelis would persist in these secret deliveries, despite our
objections, because they believed it to be in their strategic
gterests.

On August 22, 1985, the U.S., through the U.S. citizen inter-
mediary, acquiesed in an Israeli delivery of military supplies
(508 TOWS) to Tehran. We were subsequently informed that the
delivery had taken place at the end of August, though we were not
aware of the shipment at the time it was made. 0.3. acquiescence ·
in this Israeli operation was based on a decision at the highest
level to exploit existing Israeli channels with Tehran in an
effort to establish an american strategi dialogue with the
Iranian government. -

On September 14, 1985, Reverend Benjamin Weir was released in
Beirut by the Islamic Jihad Organization. This release was
preceded by an intense effort on the part of Mr. Terry Waite, the
Special Emissary of the Archbishop of Canterbury. To this date,
Mr. Waite remains the only Westerner to ever meet directly with
the Lebanese kidnappers.

On October 4, 1985, Islamic Jihad announced that it had executed Beirut Station Chief William Buckley in retaliation for the October i Israeli air raid on PLO installations in Tunis. This announcement led to a series of meetings in Europe among the U.S. (CIA and NSC), Israeli, and Iranian intermediaries. In these meetings, the Iranians indicated that, while their ability to influence the Hisballah was waning, the Rizballah had not killed

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Buckley; he had in fact died several months earlier of natural causes. We have since substantiated this information in debriefs of Father Jenco and David Jacobsen, both of whom indicate that Buckley probably died on June 3, 1985 of pneumonia-like symptoms. In late November 1985, the Israelis, responding to urgent entreaties from the Iranians, provided 18 basic RANK missiles to Iran in order to improve the static defenses around Tehran. The Israeli delivery of HAWK missiles raised U.S. concerns that ve could well be creating misunderstandings in Tehran and thereby jeopardizing our objective of arranging a direct meeting with high-level Iranian of

Devising #fordle for re-blishing)
relations with Tehgan..

Ending the Iran-Iraq War on honoraberms.

Convincing Iran to cease its support for terro
radical subversion.

Belping ensure the territorial integrity of Iran and
coordinating ways in which we might counter Soviet
activithin the region.

Mr. McFarlane made clear that Western dialogs with Iran id be precluded unless Iran was willing to use its influence to achieve the release of Western hostages in Beirut. He also made clear that we could not and would not engage in trading arms for hostages.

On January 1988, the President approved a covert action Finding directing that the intelligence community proceed with special activities aimed at accomplishing the goals set forth above. In accomwith extant stabilire 25 that the Director Coral Intelligence vol the Finding to the appropriate committees of the Congress until reasonably sure that the lives of those carrying out the operation (both U.S. and foreign) would not be in jeopardy.

On February 5-7, 0.5. officials (NSC and CIA

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representative of the Israeli Prime Ministry (Amiran Nic), and a senior-level Iranian official

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