Editor’s Note: Part 2 of our series about the "Original October Surprise" of 1980 focuses on the role of banker David Rockefeller and his collaboration with Republicans during the Iranian hostage crisis, which doomed Jimmy Carter's presidency and helped open the door to the modern era of GOP dominance.
To read the first part of the series, dealing with the inept investigative work of Indiana Democrat Lee Hamilton, click here. The series is adapted from Robert Parry’s Secrecy & Privilege: Rise of the Bush Dynasty from Watergate to Iraq:
On March 23, 1979, late on a Friday afternoon, Chase Manhattan Bank Chairman David Rockefeller and his longtime aide Joseph Verner Reed arrived at a town house in the exclusive Beekham Place neighborhood on New York’s East Side. They were met inside by a small, intense and deeply worried woman who had seen her life turned upside down in the last two months.
Iran’s Princess Ashraf, the strong-willed twin sister of the Iran’s long-time ruler, had gone from wielding immense behind-the-scenes clout in the ancient nation of Persia to living in exile – albeit a luxurious one. With hostile Islamic fundamentalists running her homeland, Ashraf also was troubled by the plight of her ailing brother, the ousted Shah of Iran, who had fled into exile, first to Egypt and then Morocco.
Now, she was turning for help to the man who ran one of the leading U.S. banks, one which had made a fortune serving as the Shah’s banker for a quarter century and handling billions of dollars in Iran’s assets. Ashraf’s message was straightforward. She wanted Rockefeller to intercede with Jimmy Carter and ask the President to relent on his decision against granting the Shah refuge in the United States.
A distressed Ashraf said her brother had been given a one-week deadline to leave his current place of refuge, Morocco. “My brother has nowhere to go,” Ashraf pleaded, “and no one else to turn to.” [See David Rockefeller, Memoirs]
Carter had been resisting appeals to let the Shah enter the United States, fearing that admitting him would endanger the personnel at the U.S. Embassy in Teheran and other U.S. interests. In mid-February 1979, Iranian radicals had overrun the embassy and briefly held the staff hostage before the Iranian government intervened to secure release of the Americans.
Carter feared a repeat of the crisis. Already the United States was deeply unpopular with the Islamic revolution because of the CIA’s history of meddling in Iranian affairs. The U.S. spy agency had helped organize the overthrow of an elected nationalist government in 1953 and arranged the restoration of the Shah and the Pahlavi family to the Peacock Throne. In the quarter century that followed, the Shah kept his opponents at bay through the coercive powers of his secret police, known as the SAVAK.
As the Islamic Revolution gained strength in January 1979, however, the Shah’s security forces could no longer keep order. The Shah – suffering from terminal cancer – scooped up a small pile of Iranian soil, boarded his jet, sat down at the controls and flew the plane out of Iran to Egypt.
A few days later, Ayatollah Ruhollah Khomeini, an ascetic religious leader who had been forced into exile by the Shah, returned to a tumultuous welcome from crowds estimated at a million strong, shouting “Death to the Shah.” The new Iranian government began demanding that the Shah be returned to stand trial for human rights crimes and that he surrender his fortune, salted away in overseas accounts.
The new Iranian government also wanted Chase Manhattan to return Iranian assets, which Rockefeller put at more than $1 billion in 1978, although some estimates ran much higher. The withdrawal might have created a liquidity crisis for the bank which already was coping with financial troubles.
Ashraf’s personal appeal put Rockefeller in what he described, with understatement, as “an awkward position,” according to his autobiography Memoirs.
“There was nothing in my previous relationship with the Shah that made me feel a strong obligation to him,” wrote the scion of the Rockefeller oil and banking fortune who had long prided himself in straddling the worlds of high finance and public policy. “He had never been a friend to whom I owed a personal debt, and neither was his relationship with the bank one that would justify my taking personal risks on his behalf. Indeed, there might be severe repercussions for Chase if the Iranian authorities determined that I was being too helpful to the Shah and his family.”
Later on March 23, after leaving Ashraf’s residence, Rockefeller attended a dinner with Happy Rockefeller, the widow of his brother Nelson who had died two months earlier. Also at the dinner was former Secretary of State Henry Kissinger, a long-time associate of the Rockefeller family.
Discussing the Shah’s plight, Happy Rockefeller described her late husband’s close friendship with the Shah, which had included a weekend stay with the Shah and his wife in Teheran in 1977. Happy said that when Nelson learned that the Shah would be forced to leave Iran, Nelson offered to pick out a new home for the Shah in the United States.
The dinner conversation also turned to what the participants saw as the dangerous precedent that President Carter was setting by turning his back on a prominent U.S. ally. What message of American timidity was being sent to other pro-U.S. leaders in the Middle East?
The dinner led to a public campaign by Rockefeller – along with Kissinger and former Chase Manhattan Bank Chairman John McCloy – to find a suitable home in exile for the Shah. Country after country had closed their doors to the Shah as he began a humiliating odyssey as what Kissinger would call a modern-day “Flying Dutchman,” wandering in search of a safe harbor.
Rockefeller assigned his aide, Joseph Reed, “to help [the Shah] in any way he could,” including serving as the Shah’s liaison to the U.S. government. McCloy, one of the so-called Wise Men of the post-World War II era, was representing Chase Manhattan as an attorney with Milbank, Tweed, Hadley and McCloy. One of his duties was to devise a financial strategy for staving off Iran’s withdrawal of assets from the bank.
Rockefeller also pressed the Shah’s case personally with Carter when the opportunity presented itself. On April 9, 1979, at the end of an Oval Office meeting on another topic, Rockefeller handed Carter a one-page memo describing the views of many foreign leaders disturbed by recent U.S. foreign policy actions, including Carter’s treatment of the Shah.
“With virtually no exceptions, the heads of state and other government leaders I saw expressed concern about United States foreign policy which they perceived to be vacillating and lacking in an understandable global approach,” Rockefeller’s memo read. “They have questions about the dependability of the United States as a friend.” An irritated Carter abruptly ended the meeting.
Despite the mounting pressure from influential quarters, Carter continued to rebuff appeals to let the Shah into the United States. So the Shah’s influential friends began looking for alternative locations, asking other nations to shelter the ex-Iranian ruler.
Finally, arrangements were made for the Shah to fly to the Bahamas and – when the Bahamian government turned out to be more interested in money than humanitarianism – to Mexico.
“With the Shah safely settled in Mexico, I had hopes that the need for my direct involvement on his behalf had ended,” Rockefeller wrote in Memoirs. “Henry [Kissinger] continued to publicly criticize the Carter administration for its overall management of the Iranian crisis and other aspects of its foreign policy, and Jack McCloy bombarded [Carter’s Secretary of State] Cyrus Vance with letters demanding the Shah’s admission to the United States.”
When the Shah’s medical condition took a turn for the worse in October, Carter relented and agreed to let the Shah fly to New York for emergency treatment. Celebrating Carter’s reversal, Rockefeller’s aide Joseph Reed wrote in a memo, “our ‘mission impossible’ is completed. … My applause is like thunder.”
When the Shah arrived in New York on October 23, 1979, Reed checked the Shah into New York Hospital under a pseudonym, “David Newsome,” a play on the name of Carter’s undersecretary of state for political affairs, David Newsom.
The arrival of the Shah in New York led to renewed demands from Iran’s new government that the Shah be returned to stand trial.
In Teheran, students and other radicals gathered at the university, called by their leaders to what was described as an important meeting, according to one of the participants whom I interviewed years later.
The students gathered in a classroom which had three blackboards turned toward the wall. A speaker told the students that they were about to undertake a mission supported by Ayatollah Khomeini, Iran’s spiritual leader and the de facto head of the government.
“They said it would be dangerous and that anyone who didn’t want to take part could leave now,” the Iranian told me. “But no one left. Then, they turned around the blackboards. There were three buildings drawn on the blackboards. They were the buildings of the U.S. embassy.”
The Iranian said the target of the raid was not the embassy personnel, but rather the embassy’s intelligence documents.
“We had believed that the U.S. government had been manipulating affairs inside Iran and we wanted to prove it,” he said. “We thought if we could get into the embassy, we could get the documents that would prove this. We hadn’t thought about the hostages. We all went to the embassy. We had wire cutters to cut through the fence. We started climbing over the fences. We had expected more resistance. When we got inside, we saw the Americans running and we chased them.”
Marine guards set off tear gas in a futile attempt to control the mob, but held their fire to avoid bloodshed. Other embassy personnel hastily shredded classified documents, although there wasn’t time to destroy many of the secret papers. The militant students found themselves in control not only of the embassy and hundreds of sensitive U.S. cables, but dozens of American hostages as well.
An international crisis had begun, a hinge that would swing open unexpected doors for both American and Iranian history.
David Rockefeller denied that his campaign to gain the Shah’s admittance to the United States had provoked the crisis, arguing that he was simply filling a vacuum created when the Carter administration balked at doing the right thing.
“Despite the insistence of journalists and revisionist historians, there was never a ‘Rockefeller-Kissinger behind-the-scenes campaign’ that placed ‘relentless pressure’ on the Carter administration to have the Shah admitted to the United States regardless of the consequences,” Rockefeller wrote in Memoirs. “In fact, it would be more accurate to say that for many months we were the unwilling surrogates for a government that had failed to accept its full responsibilities.”
But within the Iranian hostage crisis, there would be hidden compartments within hidden compartments, as influential groups around the world acted in what they perceived to be their personal or their national interests.
Rockefeller was just one of many powerful people who felt that Jimmy Carter deserved to lose his job. With the hostage crisis started, a countdown of 365 days began toward the 1980 elections. Though he may have been only dimly aware of his predicament, Carter faced a remarkable coalition of enemies both inside and outside the United States.
In the Persian Gulf, the Saudi royal family and other Arab oil sheiks blamed Carter for forsaking the Shah and feared their own playboy life styles might be next on the list for the Islamic fundamentalists. The Israeli government saw Carter as too cozy with the Palestinians and too eager to cut a peace deal that would force Israel to surrender land won in the 1967 war.
European anti-communists believed Carter was too soft on the Soviet Union and was risking the security of Europe. Dictators in the Third World – from the Philippines and South Korea to Argentina and El Salvador – were bristling at Carter’s human rights lectures.
Inside the United States, the Carter administration had made enemies at the CIA by purging many of the Old Boys who saw themselves as protectors of America’s deepest national interests. Many CIA veterans, including some still within the government, were disgruntled. And, of course, the Republicans were determined to win back the White House, which many felt had been unjustly taken from their control after Richard Nixon’s landslide victory in 1972.
This subterranean struggle between Carter, trying desperately to free the hostages before the 1980 election, and those who stood to benefit by thwarting him became known popularly as the “October Surprise” controversy.
The nickname referred to the possibility that Carter might have ensured his reelection by arranging the hostage return the month before the presidential election as an October Surprise, although the term came ultimately to refer to clandestine efforts to stop Carter from pulling off his October Surprise.
CIA Old Boys
When the hostage crisis wasn’t resolved in the first few weeks and months, the attention of many disgruntled CIA Old Boys also turned toward the American humiliation in Iran, which they found doubly hard to take since it had been the site of the agency’s first major victory, the restoration of the Shah to the Peacock Throne.
A number of veterans from that operation of 1953 were still alive in 1980. Archibald Roosevelt was one of the Old Boys from the Iranian operation. He had moved on to become an adviser to David Rockefeller at Chase Manhattan Bank.
Another was Miles Copeland, who had served the CIA as an intermediary to Arab leaders, including Egyptian President Gamal Abdul Nasser. In his autobiography, The Game Player, Copeland claimed that he and his CIA chums prepared their own Iranian hostage rescue plan in March 1980.
When I interviewed Copeland in 1990 at his thatched-roofed cottage outside Oxford in the English countryside, he said he had been a strong supporter of George H.W. Bush in 1980. He even had founded an informal support group called “Spooks for Bush.”
Sitting among photos of his children who included the drummer for the rock group, The Police, and the manager for the rock star, Sting, Copeland explained that he and his CIA colleagues considered Carter a dangerous idealist.
“Let me say first that we liked President Carter,” Copeland told me “He read, unlike President Reagan later, he read everything. He knew what he was about. He understood the situation throughout the Middle East, even these tenuous, difficult problems such as Arabs and Israel.
“But the way we saw Washington at that time was that the struggle was really not between the Left and the Right, the liberals and the conservatives, as between the Utopians and the realists, the pragmatists. Carter was a Utopian. He believed, honestly, that you must do the right thing and take your chance on the consequences. He told me that. He literally believed that.”
Copeland’s deep Southern accent spit out the words with a mixture of amazement and disgust. To Copeland and his CIA friends, Carter deserved respect for a first-rate intellect but contempt for his idealism.
“Most of the things that were done [by the United States] about Iran had been on a basis of stark realism, with possibly the exception of letting the Shah down,” Copeland said. “There are plenty of forces in the country we could have marshaled. … We could have sabotaged [the revolution, but] we had to establish what the Quakers call ‘the spirit of the meeting’ in the country, where everybody was thinking just one way. The Iranians were really like sheep, as they are now.”
Altar of Ideals
But Carter, troubled by the Shah’s human rights record, delayed taking decisive action and missed the moment of opportunity, Copeland said. Infuriating the CIA’s Old Boys, Carter had sacrificed an ally on the altar of idealism.
“Carter really believed in all the principles that we talk about in the West,” Copeland said, shaking his mane of white hair. “As smart as Carter is, he did believe in Mom, apple pie and the corner drug store. And those things that are good in America are good everywhere else.”
Veterans of the CIA and Republicans from the Nixon-Ford administrations judged that Carter simply didn’t measure up to the demands of a harsh world.
“There were many of us – myself along with Henry Kissinger, David Rockefeller, Archie Roosevelt in the CIA at the time – we believed very strongly that we were showing a kind of weakness, which people in Iran and elsewhere in the world hold in great contempt,” Copeland said. “The fact that we’re being pushed around, and being afraid of the Ayatollah Khomeini, so we were going to let a friend down, which was horrifying to us. That’s the sort of thing that was frightening to our friends in Saudi Arabia, in Egypt and other places.”
But Carter also bent to the moral suasions of the Shah’s friends, who argued on humanitarian grounds that the ailing Shah deserved admission to the United States for medical treatment. “Carter, I say, was not a stupid man,” Copeland said. Carter had even a greater flaw: “He was a principled man.”
So, Carter decided that the moral act was to allow the Shah to enter the United States for treatment, leading to the result Carter had feared: the seizure of the U.S. Embassy.
As the crisis dragged on, the Carter administration cranked up the pressure on the Iranians. Along with diplomatic initiatives, Iran’s assets were frozen, a move that ironically helped David Rockefeller’s Chase Manhattan Bank by preventing the Iranians from cleaning out their funds from the bank’s vaults.
In Memoirs, Rockefeller wrote that the Iranian “government did reduce the balances they maintained with us during the second half of 1979, but in reality they had simply returned to their historic level of about $500 million,” Rockefeller wrote. “Carter’s ‘freeze’ of official Iranian assets protected our position, but no one at Chase played a role in convincing the administration to institute it.”
In the weeks that followed the embassy seizure, Copeland said he and his friends turned their attention to figuring a way out of the mess.
“There was very little sympathy for the hostages,” Copeland said. “We all have served abroad, served in embassies like that. We got additional pay for danger. I think, for Syria, I got fifty percent extra in salary. So it’s a chance you take. When you join the army, you take a chance of getting in a war and getting shot. If you’re in the diplomatic service, you take a chance on having some horror like this descend on you.
“But on the other hand, we did think that there were things we could do to get them out, other than simply letting the Iranians, the students, and the Iranian administration know that they were beating us,” Copeland said. “We let them know what an advantage they had. That we could have gotten them out is something that all of us old professionals of the covert action school, we said from the beginning, ‘Why don’t they let us do it?’”
According to The Game Player, Copeland met his old friend, ex-CIA counter-intelligence chief James Angleton, for lunch. The famed spy hunter “brought to lunch a Mossad chap who confided that his service had identified at least half of the ‘students,’ even to the extent of having their home addresses in Teheran,” Copeland wrote. “He gave me a rundown on what sort of kids they were. Most of them, he said, were just that, kids.”