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Pipeline Deal: How Private Citizens Use Public Power

February 07, 1988|MICHAEL WINES and RONALD J. OSTROW | Times Staff Writers

WASHINGTON — Even jaded bureaucrats like to flaunt their White House access, and former national security aide Roger W. Robinson was positively beaming on the afternoon of June 24, 1985, after returning from the West Wing office of then-National Security Adviser Robert C. (Bud) McFarlane.

"Guess what," he crowed to friends. "I just met with Bud and a Swiss billionaire."

Indeed he had. He had failed, however, to notice the real power in the office.

Seated with McFarlane and Bruce Rappaport, a Geneva oilman promoting a $1-billion Iraqi pipeline project, was E. Robert Wallach, Rappaport's lawyer and the man who, in later months, would direct efforts to persuade the U.S. government to put its stamp of approval on the deal.

The unfolding story of those efforts, now being studied by independent counsel James C. McKay in his investigation of Atty. Gen. Edwin Meese III, is an object lesson in the ways that private citizens use public power to advance their own ends.

For this Administration, the story is an old one. Central to the Iran-Contra affair was White House support for the private arms deals of Richard V. Secord and Albert A. Hakim. The Wedtech Corp. scandal--which led to Wallach's indictment on racketeering, fraud and conspiracy charges in December--mushroomed after reports that the small, South Bronx-based private firm was able to apply White House pressure to win a Pentagon contract.

In the pipeline operation, some observers question the White House's decision to bypass the State Department--the usual channel for foreign policy matters--to pursue an overseas venture of less than vital national interest.

As in the Iran-Contra affair, one U.S. official noted, the Administration ignored its diplomats and turned to the National Security Council to run a foreign operation. This time, it sought to unite Iraq and Israel--Middle East enemies for four decades--through the services of a Swiss oilman and an American attorney general.

Favors Under the Table

The episode also underscores the NSC's use of under-the-table favors that have produced political or financial benefits for private citizens by skirting procedures designed to make policy on the basis of national interest, not personal gain.

The principal players in the pipeline deal--Iraq, Jordan, Rappaport, the giant construction firm Bechtel Group Inc. and a parade of bankers--had the money and expertise to stretch a steel pipe 590 miles across a desert in the middle of a potential Mideast war zone.

What they sorely needed was the stamp of political and financial stability that would make the venture not just feasible, but profitable. Only the American government could provide that.

Wallach, a San Francisco personal-injury attorney, knew little about pipelines and nothing about Rappaport before the two men met a few months earlier. He did, however, have something about which he frequently and openly boasted: a personal friendship with a man who could open doors, the attorney general of the United States.

Political Clout

"The rest of the team didn't have any political clout," one private participant deeply involved in the pipeline deal said last week. "Wallach did."

He employed that clout in efforts to revive the pipeline deal on at least two critical occasions, in May and September of 1985, when the project faced certain death without U.S. government aid. Along the way, according to sources close to the project inside and outside the government, an above-board business deal reported widely in trade journals and international press took on a tinge of secrecy and political influence that surprised even some of its backers.

"Working legitimately, you could have gotten a legitimate amount of government support for this," one participant said. "I was damned proud of it. It was a heady feeling to be in a project that involved cooperation between old enemies and might help lead to peace."

The old enemies, Iraq and Israel, were the reason Wallach's White House influence was viewed as vital to the pipeline deal.

A Free Flow of Oil

U.S. backing for the pipeline appears to fall in line with the Administration's long-standing policy of maintaining a free flow of oil from the region. At the same time, however, that support could have added significant weight to Iraq's side of the scale in its seven-year war with Iran. While the United States remains militarily neutral in the conflict, the Administration has openly blamed Iran for continuing the war.

Iraq, for its part, was desperate to replace two major export routes for its domestically produced oil, both lost in its war with Iran. Iranian air strikes destroyed Iraq's Persian Gulf oil terminals in 1980, and Iran's ally, Syria, had denied Iraq the use of its pipelines in 1981.

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