It also is clear that U.S. military supplies were soon moving to Iran via Israeli middlemen with the approval of the new Reagan administration.
In a PBS interview, Nicholas Veliotes, Reagan's assistant secretary of state for the Middle East, said he first discovered the secret arms pipeline to Iran when an Israeli weapons flight was shot down over the Soviet Union on July 18, 1981, after straying off course on its third mission to deliver U.S. military supplies from Israel to Iran via Larnaca, Cyprus.
"It was clear to me after my conversations with people on high that indeed we had agreed that the Israelis could transship to Iran some American-origin military equipment," Veliotes said.
In checking out the Israeli flight, Veliotes came to believe that the Reagan-Bush camp's dealings with Iran dated back to before the 1980 election.
"It seems to have started in earnest in the period probably prior to the election of 1980, as the Israelis had identified who would become the new players in the national security area in the Reagan administration," Veliotes said. "And I understand some contacts were made at that time."
In the early 1980s, the key players inside Iran also experienced a shakeup. Bani-Sadr was ousted in 1981 and fled for his life, replaced as president by Khamenei; Mousavi was named prime minister; Rafsanjani consolidated his financial and political power as speaker of the Majlis; and Mehdi Karrubi became a powerful figure in Iran's military-and-foreign-policy establishment.
Besides tapping into stockpiles of U.S.-made weaponry, the Israelis arranged shipments from other third countries, including Poland, according to Israeli intelligence officer Ari Ben-Menashe, who described his work on the arms pipeline in his 1992 book, Profits of War.
Since representatives of Likud had initiated the arms-middleman role for Iran, the tens of billions of dollars in profits flowed into coffers that the right-wing party controlled, with some of that money diverted to finance West Bank settlements further cementing Likud's political power, Ben-Menashe said.
The lucrative arms deals created envy inside the rival Labor Party especially after it gained a share of power in the 1984 elections, Ben-Menashe said.
The Iran-Contra Case
In this analysis, Labor's desire to open its own arms channel to Iran laid the groundwork for the Iran-Contra scandal, as the government of Prime Minister Shimon Peres tapped into the emerging neoconservative network inside the Reagan administration on one hand and began making contacts with Iran's leadership on the other.
Reagan's National Security Adviser Robert McFarlane, who had close ties to the Israeli leadership, worked with Peres's aide Amiram Nir and neocon intellectual (and National Security Council consultant) Michael Ledeen in spring 1985 to arrange these connections to Iran.
Ledeen's chief intermediary was a businessman named Manucher Ghorbanifar, who was held in disdain by the CIA as a fabricator but claimed he represented high-ranking Iranians who favored improved relations with the United States -- and who were eager for American weapons.
Ghorbanifar's chief contact, as identified in official Iran-Contra records, was Mohsen Kangarlu, who worked as an aide to Prime Minister Mousavi, according to Israeli journalist Ronen Bergman in his 2008 book, The Secret War with Iran.
However, Ghorbanifar's real backer inside Iran appears to have been Mousavi himself. According to a Time magazine article, Ghorbanifar "became a trusted friend and kitchen adviser to Mir Hussein Mousavi, Prime Minister in the Khomeini government."
In November 1985, at a key moment in the Iran-Contra scandal -- as one of the early missile shipments via Israel went awry -- Ghorbanifar conveyed Mousavi's anger to the White House.