The Iran-Contra Affair: How the US Government Sold Weapons to Iran and Cocaine to Americans to Fund Terrorism in Latin America and Spur Pro-Western Regime Change

The Iran-contra affair was originally sparked by the Iran hostage crisis, which began on November 4, 1979 when a group of Iranian students called the Muslim Student Followers of the Imam’s Line took over the American embassy in Iran, taking hostage 52 diplomats and civilians staying at the embassy in Tehran. The students were supporters of the Iranian Revolution of 1979, a series of protests that forced the tyrannical Shah (who was supported by the US and whose power was consolidated by the CIA coup of 53′ discussed earlier in the book) after years of dictatorship to step down. Prime Minister, Shapour Bakhtiar, established a provisional government after the Shah fled to the US and Bakhtiar dissolved the brutal, secret police force, SAVAK, and released many political prisoners. However, this provisional government was soon after dismantled by Sayyid Ruhollah Mūsavi Khomeini also known as Ayatollah Khomeini who instituted an Islamic republic with Sharia law and a constitution that provided him with more power than was intended for him, along with control of the military and the power to appoint top governmental officials and judges.

In exchange for the hostages, the kidnappers demanded the Shah return to Iran for a trial and execution. They also requested an apology from U.S.G. for previous interventions like the coup in 53′. After several failed negotiations and rescue attempts over the course of 444 days, the hostages were finally released after the Algiers Accords were signed by US and Iranian representatives on January 19, 1981. By signing the Accords, the US agreed to remove trade sanctions imposed on Iran and not to intervene politically or militarily in Iran again. The US also sold arms to Iran around this time and it is thought that this contributed to their decision to release the hostages as well. (In fact, some call this the “arms-for-hostages scandal”.) A few months prior in September 1980, the Iraqi military invaded Iran, emboldened by the hostage crisis, which Saddam figured would pit the US against Iran and support Iraq in their war. Zbigniew Brzezinski, President Jimmy Carter’s National Security Adviser also advised Saddam to invade as discussed previously. The USG under newly sworn in President Reagan did support Iraq but as mentioned both states were supported by the USG in an effort to impose as much mutual destruction as possible.

After Reagan sold Iran planeloads of weapons to fight Iraq, the money acquired from these sales was then used by the CIA to fund right-wing Nicaraguan rebel groups collectively referred to as the “Contras” (short for contrarrevolución, a label they did not like) who regularly committed war crimes. In fact, the Contras committed over 1300 terrorist acts over the course of their existence.1 Reagan funded them to take down the left-wing, socialist Sandinista government, which rose during the Nicaraguan Revolution after toppling the US backed Somoza dictatorship that had been in power for decades. Reagan used the old and tired, false pretense of “bringing democracy” to Nicaragua and “peace” to all of Central America and the Middle East in an attempt to justify his actions, but they did just the opposite. Most of the money given to the Contras was used for weapons, and some of these weapons were bought directly from the U.S. In order to create general chaos and turmoil, the CIA airdropped booklets called the “Freedom Fighter’s Manual” over the country, which instructed citizens how to bring down telephone lines, disable vehicles, and make and use Molotov cocktails.

Most of Congress did not support the sale of advanced missiles (mostly TOW anti-tank missiles) to the Iranian government, and they were even more opposed to funding the Nicaraguan Contras with the proceeds from these sales. Aside from being immoral, funding the Nicaraguan Contras was in direct violation of the Boland Agreement and the United States treaty obligations with Nicaragua. Years later in 1986 Nicaragua charged the U.S. in the International Court of Justice with violating these obligations and won. In the same month that the Court made its ruling, however, Congress caved to political pressure from higher-ups in government and flipped its decision, and the funding to the Contras resumed in the sum of $100 million dollars of taxpayer money.2 (The funding was called “humanitarian aid,” even though most of it went to weaponry.)

In 1983 Congress denied funding the Contras for the fourth time. But the CIA, Reagan, and others in his administration found other ways to fund their insurgency. The Contras were heavily involved in the cocaine trade and the CIA offered them open access to US markets. Tons of cocaine was shipped to the United States via the CIA over the following years, which caused widespread cocaine and crack addiction. This was incredibly ironic and hypocritical as Ronald Reagan was the founder of the “Just Say No” to drugs campaign, and his wife, Nancy Reagan, was the face of the campaign. Even more ironic was Reagan’s accusation made in 1985 that the Sandinistas were “exporting drugs to poison our youth”.

Crack use at the time was more common among poor people of color than among whites. White people certainly weren’t immune to the epidemic, but most white individuals who took drugs, especially affluent ones, preferred powdered cocaine to crack because it is less addictive and the addiction is generally less ugly. Cocaine was expensive and perceived as a status symbol. It also served as a metaphor for the economic high of the ruling class at the expense of everyone else.

Crack is the “rock” form of cocaine also known as methylbenzoylecgonine or “freebase” cocaine, which can be smoked. It is simple to make and only requires cocaine and a chemical base, such as baking soda or sodium hydroxide. When crack was invented around 1984, it was far more affordable and available in poor neighborhoods than cocaine. This is likely why Reagan approved the Anti-Drug Abuse Act of 1986 that made the punishment for a “cocaine base” offense up to 100 times more severe than the punishment for a powder cocaine offense. In 1993 the US Sentencing Commission found that “cocaine smokers got an average sentence of nearly three years. People who snorted cocaine powder received a little over three months.” As stated crack is a more addictive substance than cocaine, but that is no reason to punish crack users more severely than cocaine users. If anything, crack addicts usually need more help. This arbitrary 100 times more severe sentence was created on the flimsy basis of testimony taken out of context from Dr. Robert Byck, a Yale University drug expert at a 1986 U.S. Senate committee who was asked if he heard some believed that crack was 50 times more addictive than powdered cocaine. He confirmed and added that this figure was “doubled by people who wanted to get tough on cocaine…The resultant 100-to-1 (powder-vs.-crack) weight ratio, Byck said, was “a fabrication by whoever wrote the law, but not reality. . . . You can’t make a number.” Justice Department researchers estimated that if crack and powder sentences were made equal, “the black-white difference . . . would not only evaporate but would slightly reverse.” Based on such findings, the commission recommended in May 1995 that the cocaine-sentencing laws be equalized, calling the 100-to-1 ratio “a primary cause of the growing disparity between sentences for black and white federal defendants.” Apparently fearful of being seen as soft on drugs, Congress voted overwhelmingly to keep the crack laws the same. On Oct. 30, President Clinton signed the bill rejecting the commission’s recommendations”3

Freeway” Ricky Ross, a black drug dealer from LA, was one of the largest distributors of crack in Los Angeles during the 1980s, and his primary cocaine connection was Oscar Danilo Blandón Reyes, former director of agricultural markets under Nicaraguan dictator, Anastasio Somoza, whose family rose to power largely with support of the US Marine Corp, after which they ruled for decades persecuting dissidents, journalists, and socialists ruthlessly as explained previously in section 6.6. In a conversation Blandón had with an undercover DEA informant, he claimed he sold between 2000-4000 kilos over a decade. Blandón entered the drug game in 1981 when he met with Juan Norwin Meneses, a cocaine kingpin of the Bogotá cartel (whose drug activities were known to the feds since 1974 according to Gary Webb, one of the first journalists to uncover the Iran Contra Affair) connected with former CIA agent, Marcos Aguado, and Col. Enrique Bermúdez, a former military adviser to Somoza (and military attaché to the US) who was welcomed into the US as a “political refugee” in 1979 after the fall of the Somoza regitme. Bermúdez was given a work permit and visa and put on the payroll of the CIA in mid 1980. He was paid for the next decade to organize the “Fuerza Democratica Nicaraguense” (FDN) or the Nicaraguan Democratic Force” a Contra group in their fight against the Sandinistas.4 Many members of the FDN (and other Contra groups like the Revolutionary “Democratic” Alliance and M-3) belonged to Somoza’s loyalist National Guard. Together they raised money for the FDN via massive cocaine sales. According to Gary Webb, the FDN was started by the CIA by combining “existing groups of anti-communist exiles into a unified force it hoped would topple the new socialist government of Nicaragua.”

Blandón laundered the money made from these cocaine deals through Orlando Murillo, a top officer of a chain of Florida banks called the Government Securities Corporation where the money was then sent the FDN. Blandón was only able to sell so much coke for so long because of the protection he received from the CIA and other federal agencies. For example, on October 26, 1986 when the Los Angeles Sheriff’s Department, the FBI, local police, and the IRS raided more than a dozen locales connected to Blandon’s drug activities, they found nothing because the CIA warned Blandón they were coming. The second time Blandón was arrested, the U.S. Justice Department persuaded local police to drop their case against him, arguing that prosecution would compromise an “active investigation.”5 (When Blandón testified as a witness for the US Department of “Justice,” federal prosecutors procured a court order to forbid defense lawyers from revealing his connections to the CIA.)6 Meneses received similar protection selling massive quantities of cocaine in the US. In 1985 when Celerino Castillo III, the DEA agent assigned to El Salvador reported large quantities of cocaine were being shipped into the US, DEA higher ups launched an investigation into Castillo who claims the DEA covered up the affair.7 A search warrant affidavit filed by Thomas Gordon, a former Los Angeles County sheriff’s narcotics detective, dated Oct. 23, 1986 reveals the FBI and DEA knew Blandón was funding the Contras for years with cocaine sales but did nothing before Blandón’s properties were raided by local police on October 27th, after which the CIA seized files related to the raid from the LA County police department’s evidence room. Ronald Lister, a CIA agent who worked with Blandón transporting drug money was also present at the time of the raid. Ten pages of these seized files were secretly copied by detectives and after defense attorney Harlan Braun on behalf of Deputy Daniel Garner attempted to have these pages introduced in the criminal trial, Braun received a gag order and Garner was convicted of “corruption.”8 Lister later pleaded guilty to selling coke in 1991. The feds ignored other whistle-blowers too. For example, Brian Barger of the Associated Press reported in 1985 that a Nicaraguan rebel leader informed US authorities that the group was being paid $50,000 to help smuggle and guard a Colombian shipment of cocaine and that the money was going to fight the Nicaraguan state. The leader asked for $50,000 from the US Embassy to turn in the smugglers but the deal was rejected and the drugs were smuggled without any arrests.9

Blandón sold Ross coke at low prices that undercut the competition, and according to Ross, he often made two to three million dollars every day selling cocaine and crack to residents of South Central Los Angeles. Because of the lucrativeness of the crack trade, it spread across America and found its home in ghettos of large inner-cities. When Ross was arrested, in order to reduce his sentence to four years he gave up the names of many of the corrupt cops who provided him protection in exchange for cash. When he was released from prison, he set out to help his community, but he needed money. Blandón was trying to contact him to arrange a sale at this time, so Ross decided to go back to his old business to fund his work. But Blandón had other plans. Unbeknownst to Ross, Blandón had agreed to work with the DEA in a plea agreement to reduce his sentence after being busted again in 1992. The DEA wanted Ross, so he arranged the deal to set Ross up. After the deal was raided, Ross was sentenced to life in prison while Blandón received a mere two-year prison sentence and afterwards became a well-paid DEA agent. Blandón was not even a legal citizen at the time, but he was issued a green card after his time in prison. He also received $45,500 in government rewards and expenses for setting up Ross.

Ross was set up because the Contras were no longer active, having been converted to an oppositional political party in 1990 after the Sandinistas were defeated in elections by Contra leaders and forced to sign a “peace plan” with the Contras several years prior. The public was also beginning to receive information about the Iran-Contra affair, (a congressional investigation launched by John Kerry in 1988 revealed that the Contras were trafficking drugs and that the government knew about it10) and by blaming a black man for it, the government could distance itself from the crack trade, assume no responsibility for their actions, and further their racist narrative about “criminal minorities”. Meneses was similarly discarded by the CIA after outliving his usefulness to them and he was arrested in connection with 750 kilos of cocaine in 1992. Enrique Miranda, a relative of Meneses and former military intelligence officer testified in court that “This operation, as Norwin told me, was executed with the collaboration of highranking Salvadoran military personnel. They met with officials of the Salvadoran air force, who flew (planes) to Colombia and then left for the U.S., bound for an Air Force base in Texas.” American pilots like William Robert “Tosh” Plumlee paid by the CIA also made these drug smuggling and gun running trips.

Ronald Reagan appeared a number of times on television holding bags of cocaine and crack. He explained how easy it was to buy and how cheap it was. He mentioned the destructive effects of addiction, but at-risk individuals may have seen these broadcasts more as advertisements than public health notices. It seems very plausible that Reagan just wanted to encourage its use since his CIA goons were facilitating the trade to fund the Contras and crack was mostly destroying poor minority communities, which Reagan had nothing but contempt for. The very cocaine he was holding may have been from the Contras themselves.

Blandón was not the only government official involved in the Iran-Contra scandal to escape punishment and instead receive payment for these crimes. Not one government official spent a day in prison for these offenses, despite the fact that the Contras they assisted killed around 40,000 Nicaraguans. George W. Bush Sr. pardoned six top officials involved in the Iran-Contra scandal. National Security Council staff member and former US Marine Corps Lieutenant Colonel, Oliver North, who shredded all of the US National Security Council documents about funding the Contras and weapons sales to Iran was one of pardoned individuals. The National Security Archive exposed Oliver North’s diary, in which he wrote “Honduran DC-6 which is being used for runs out of New Orleans is probably being used for drug runs into the U.S.” on August 9th 1985. Another entry dated July 12, 1985 states that “14 million to finance [an arms depot] came from drugs” and an entry dated July 9, 1984 talks about plans to pick up 1500 kilos of cocaine paste.11 Despite this glaring evidence, Oliver North is not only a free man but he now has his own TV show on Fox, called“War Stories” which has been running since 2001.

Overall, the 1980s were a time of economic decline for most minorities and economic prosperity for upper-class, white Americans, and this was largely due to the cocaine and crack epidemics, (as well as the resurgent stock market). Many large corporations were getting rich off of the new invention of financialization, which turns all products and services into financial instruments that can be traded in financial markets. This increases the assets of the financial elite and takes away power and resources from the common people actually doing the most work. Permaculture has declined sharply because of it.

Many top earners who were not selling cocaine in the 1980s profited from its sale because they helped launder the drug money, and there was billions to be laundered. Any business that is not concerned about the source of income it receives or will not even record transactions it makes is going to attract drug dealers who want to conceal the source of their income. Most large banks, car manufacturers, jewelers, and real estate companies were not concerned with the origins of the heaps of money they were receiving. This is rarely a concern. For example, General Motors has sold hundreds of thousands of cars to drug dealers and drug lords the world over, (especially in South America) and it continues to do so. It was also propped up by Obama who bailed out GM during his Presidency. All of this drug money resulted in a tremendous increase in bank profits, especially in Miami in the 1980s. More money was deposited in the Miami Federal Reserve Bank in this period than in any other Federal Reserve Bank in the country.12 Former CIA operative, Robert Steele, explained in an interview that the drug war is “being used against poor people and not against the people who benefit from drugs, which are the bankers who launder the money.”

Drug money is often invested in the largest corporations since these transactions can get lost among many. Therefore, rich, “legitimate” businessmen who already run these corporations end up profiting the most from the trade as a result. In fact, many of the buildings that stand in the heart of Miami today were constructed with drug money received by banks and other corporations.

As usually happens, many of the drug dealers and addicts of the era were either killed or imprisoned. Fidel Castro’s deportation of unwanted criminals from Cuba contributed to the rise of drug crime in Florida since many of them came there to sell cocaine. Many Colombian coke dealers were doing the same and the conflict between them for control of the drug trade was responsible for the large increase in murders in Miami and the rest of Florida at this time.

The Iran-Contra scandal demonstrated that many in government have no ethical or moral opposition to the distribution of drugs as long as they get their cut. The affair served the American government’s economic agenda domestically and abroad in three ways: It funded the Iranians to protect America’s oil interests (while facilitating the murder of large groups of Islamic people); it funded the Nicaraguan contras, which were out to destroy a communist government, and it left many destitute American minorities with nothing but devastating addictions. Surely, many similar state operations exist that have yet to be uncovered.


3 Gary Webb: Cocaine sentences weighted against blacks. San Jose Mercury News. Aug 23, 1996.

4 Alan Maass: Cocaine, contras and the CIA. November 20, 2014.

5 Gary Webb: Drug king free, but black aide sits in jail – How cheap cocaine became the scourge of the inner city. San Jose Mercury News. Aug 23, 1996

6 Gary Webb: Cocaine pipeline financed rebels – Evidence points to CIA knowing of high-volume drug network. San Jose Mercury News. August 22, 1996.

7 Gary Webb: Salvador air force linked to cocaine flights, Nicaraguan contras, drug dealer’s supplier. San Jose Mercury News. Aug 22, 1996

8 Gary Webb and Pamela Kramer: Affidafit shows CIA knew of contra drug ring. Knight-Ridder Newspapers. Oct. 3, 1996


10 Subcommittee on Terrorism, Narcotics, and International Operations of the Committee on Foreign Relations: “Drugs, Law Enforcement, and Foreign Policy.” Committee Print. S. Pet. 100-165. US Government Printing Office. Washington, 1989.

11 The Oliver North File: His Diaries, E-Mail, and Memos on the Kerry Report, Contras and Drugs. National Security Archive Electronic Briefing Book No. 113. February 26, 2004.

12 Corben, Billy: Cocaine Cowboys. 2006. Film.

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