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May 15, 1999
Russia's Prime Minister and October Surprise

By Robert Parry

In May 1999, as the world’s press detailed the biography of Russia’s new prime minister, Sergei V. Stepashin, the reporters missed one of the most curious chapters.

 In the closing days of George Bush’s presidency in 1993, Stepashin secretly reported to the U.S. Congress that the outgoing president had participated in a scheme with Iran that bordered on treason.

Stepashin informed a special House task force that Russian intelligence information implicated Bush along with former President Reagan and CIA directors William J. Casey and Robert Gates in a series of clandestine contacts with Iran during the 1980 presidential campaign.

Stepashin, then chairman of the Supreme Soviet's Committee on Defense and Security Issues, had overseen an official review of what Moscow’s intelligence files revealed about Republican secret activities aimed at undercutting President Carter's desperate efforts to free 52 American hostages held in Iran in 1980.

Those long-simmering allegations of Republican sabotage were known as the "October Surprise" controversy, named after GOP suspicions that Carter was hoping to free the hostages right before the November elections.

Instead, according to a variety of Iranian officials and foreign intelligence operatives, Republican emissaries negotiated a secret deal to delay the hostages' freedom. The hostages were freed on Jan. 20, 1981, minutes after President Reagan was sworn in.


Stepashin undertook the review of Russia's intelligence files in 1992 at the request of Rep. Lee Hamilton, D-Ind., who was head of the congressional task force assigned to examine the controversy. Hamilton sent Stepashin the request on Oct. 21, 1992, presumably because some members of the bipartisan task force suspected that the October Surprise allegations of Republican misconduct might have originated as Soviet "disinformation."

By fall 1992, under pressure from then-President George Bush and other Republicans, the task force already had settled on a finding that there was "no credible evidence" to support the charges that the Reagan-Bush campaign had sabotaged Carter's hostage negotiations.

But in December 1992, new evidence emerged lending support to the allegations. Journalist David Andelman, who was a biographer to former French intelligence chief Alexandre deMarenches, testified that deMarenches had disclosed that he assisted Reagan’s campaign director William Casey set up hostage talks with Iranian officials in Paris in October 1980, as some intelligence operatives had alleged.

On Dec. 17, 1992, former Iranian president Abolhassan Bani-Sadr sent the task force a detailed letter describing the conflict within the Iranian government over the secret hostage deal with the Republicans. Bani-Sadr said he first learned the outlines of the deal in July 1980 from Reza Passendideh, a nephew of Ayatollah Ruhollah Khomeini, the radical Islamic leader.

“Passendideh told me that if I do not accept this proposal, they [the Republicans] would make the same offer to my [radical Iranian] rivals. He further said that they [the Republicans] have enormous influence in the CIA. ... Lastly, he told me my refusal of their offer would result in my elimination.”

In the letter, Bani-Sadr said he resisted the threats and pushed for immediate release of the U.S. hostages. But Bani-Sadr said radicals in the parliament blocked a last-minute deal with Carter and delayed the final release of the hostages until Jan. 20, 1981.

A third shoe of new evidence dropped on Dec. 21, 1992, in the secret testimony of CIA officer Charles G. Cogan. The Middle East expert had worked on the Iran crisis in 1980 and recalled a conversation in early 1981 about the sabotage of Carter’s hostage-release efforts.

Cogan testified that he had been meeting with the new CIA director, William Casey, when Joseph V. Reed, a longtime aide to banker David Rockefeller, arrived. Cogan said he had a “definite memory” of a comment that Reed made about disrupting Carter’s pre-election efforts, but he could not precisely recall the verb used.

“Joseph Reed said, ‘we’ and then the verb [and then] something about Carter’s October Surprise,” Cogan testified. “The implication was that we did something about Carter’s October Surprise, but I don’t have the exact wording.”

A congressional investigator who discussed the recollection with Cogan in a less formal setting concluded that the verb was likely the past tense of an expletive related to sex.

Cogan also said he had recently told Reed about the recollection and Reed did not deny making the comment. When contacted by the task force, however, Reed hotly resisted efforts to secure his testimony, even threatening reprisals against the FBI agent who approached him.

In the end, Reed was allowed to finesse Cogan’s recollection with a statement that he [Reed] did “not specifically know what October Surprise refers to.”

 GOP Innocence?

In January 1993, despite the new evidence, Hamilton’s task force pressed ahead with its conclusion of Republican innocence.

The debunking report was sent to the Government Printing Office in early January with a formal release scheduled for Jan. 13. Reporters at leading newspapers were briefed that the longstanding charges had turned out to be bogus.

Then, on Jan. 11, 1993, Stepashin reported back with the results of his internal Russian investigation. Translated by the U.S. Embassy in Moscow and forwarded to Congress, Stepashin's six-page report stated that Moscow possessed detailed information about secret initiatives undertaken by the Reagan-Bush campaign to negotiate a delay in the hostages’ freedom.

"William Casey, in 1980, met three times with representatives of the Iranian leadership," Stepashin's report read. "The meetings took place in Madrid and Paris."

At the Paris meeting in October 1980, "R[obert] Gates, at that time a staffer of the National Security Council in the administration of Jimmy Carter, and former CIA director George Bush also took part. … In Madrid and Paris, the representatives of Ronald Reagan and the Iranian leadership discussed the question of possibly delaying the release of 52 hostages from the staff of the U.S. Embassy in Teheran."

 Stepashin's report also described President Carter's secret offers to Iran. One key meeting occurred in Athens in July 1980 with Pentagon representatives agreeing "in principle" to deliver "a significant quantity of spare parts for F-4 and F-5 aircraft and also M-60 tanks … via Turkey," according to Stepashin's report.

In return, Iranians "discussed a possible step-by-step normalization of Iranian-American relations [and] the provision of support for President Carter in the election campaign via the release of American hostages."

Stepashin wrote matter of factly about this geopolitical bartering. He observed that both the Reagan campaign and the Carter administration "started with the proposition that [Iran's leader] Imam [Ruhollah] Khomeini, having announced a policy of 'neither the West nor the East,' and cursing the 'American devil,' imperialism and Zionism, was forced to acquire American weapons, spares and military supplies by any and all possible means."

The Republicans simply won the bidding war. But President Carter had the constitutional authority to conduct negotiations with foreign powers. The Republican campaign did not.

Fulfilled Debt

Stepashin also described how the Reagan administration fulfilled its debt to Iran. "After the victory of R. Reagan in the election, in early 1981, a secret agreement was reached in London in accord with which Iran released the American hostages, and the U.S. continued to supply arms, spares and military supplies for the Iranian army," Stepashin wrote.

The deliveries were carried out by Israel, often through private arms dealers, his report said. Spares for F-14 fighters and other military equipment went to Iran from Israel in March-April 1981 and the arms pipeline stayed open into the mid-1980s.

"Through the Israeli conduit, Iran in 1983 brought surface-to-surface missiles of the 'Lance' class plus artillery of a total value of $135 million," Stepashin's report stated. "In July 1983, a group of specialists from the firm, Lockheed, went to Iran on English passports to repair the navigation systems and other electronic components on American-produced planes."

The tap for Iranian-bound arms opened wider in 1985, with the Iran-contra shipments.

Matching Information 

Stepashin's report matched other information that the House task force possessed. The Israelis, indeed, had shipped U.S. military spares to Iran in the early 1980s, with the acquiescence of senior Reagan administration officials.

But Hamilton’s task force had finessed the evidence of secret Reagan-approved arms shipments in the early 1980s by arguing that the deliveries did not prove a "quid pro quo" dating back to 1980.

Hamilton’s task force also had received multiple corroboration about October Surprise meetings from senior Iranian officials, French intelligence officers and intelligence operatives from Israel and other Middle East nations.

[Since then, Palestinian leader Yasir Arafat has admitted to former President Carter that Republicans also approached the Palestine Liberation Organization with a plan to delay the hostages' release. See Diplomatic History, Fall 1996]

Still, the House task force rejected the October Surprise charges, accepting the denials -- and strained alibis -- of senior Republicans, including President Bush, who was running for vice president in 1980 and was seeking reelection as president during most of the task force investigation in 1992.

So, the arrival of Stepashin's report on Jan. 11 added a new complication. The two days before the official release of the findings offered inadequate time for any serious examination of the Russian material. The record shows only that a U.S. Embassy political officer was dispatched to press the Russians for more details.

The Russians stood by their report, but would not divulge the intelligence sources and methods. They simply declared that the information came from Stepashin's Committee on Defense and Security Issues, roughly the equivalent of the Senate Intelligence Committee.

Way Out?

Offering Hamilton a possible way out, the U.S. Embassy officer speculated that Moscow's report might be "based largely on material that has previously appeared in the Western media." Though supported by no evidence, the embassy speculation was included in the "confidential" cable to Hamilton. The suggestion was quietly accepted by the task force.

Yet nearly as serious as the original October Surprise charge was the fact that the Russians were claiming to have sensitive evidence implicating two U.S. presidents [Reagan and Bush] and two CIA directors [Casey and Gates] in serious crimes of state akin to treason.

If true, the Soviets were in a position to blackmail top U.S. officials for 12 years. The full October Surprise story also remains politically sensitive today given the status of Bush’s son, Texas Gov. George W. Bush, as the Republican front-runner for the 2000 election. 

But Stepashin’s report did not change Hamilton’s plans. On Jan. 13, 1993, Hamilton and other task force officials announced the "debunking" of the October Surprise story. At the news conference, no one mentioned Stepashin's report or the other evidence that contradicted the official findings.

The task force stuck Stepashin's report -- along with other documents that contradicted the conclusions -- into a box that was stored away with other documents from the October Surprise investigation.

Ladies Room

In late 1994, nearly two years later, I received permission to review the unclassified records from the task force investigation. I was led to dozens of boxes stored in a former Ladies Room of an obscure office off the Rayburn House Office Building parking garage.

In the boxes, I found not only the unclassified records, but a number of secret documents that apparently had been left behind by accident, including Cogan’s testimony. Another was the "confidential" embassy cable containing the translation of Stepashin's report.

While a stunning example of secret U.S.-Russian cooperation in the post-Cold War era, the Stepashin report still begged the larger question of whether it was based on solid intelligence from the KGB’s own sources in Europe, North America and the Middle East, or whether it was simply "blow back" from Western media reports as the U.S. Embassy speculated.

In the weeks after discovering Stepashin's report, I contacted a well-placed government source in Europe who had close ties to senior Russian officials. At my request, the source inquired through his Moscow contacts about the basis for Stepashin's report.

Later, the source called me back. He said the Russians were insisting that the intelligence was their own and that the information was reliable. The source chuckled at the notion that the Russians would just repackage some Western news clips and palm them off on Congress.

Noting the Russian need for U.S. financial assistance in early 1993, the source added that the Russians "would not send something like this to the U.S. Congress at that time if it was bullshit." Instead, the Russians considered the Stepashin report "a bomb" and "couldn't believe it was ignored."

Little did the Russians know that not only did the House task force ignore the Stepashin report, but actually stuck it in a box that was piled unceremoniously on the floor of a former Ladies Room off a congressional parking garage.

In June, I spoke directly with a senior Russian diplomat who was familiar with the Stepashin report. Although the diplomat had not seen the documents upon which the report was based, he confirmed that the Soviet Union had its own well-placed sources in key governments connected to the U.S.-Iranian maneuvering.

“There’s no doubt the report is true,” the diplomat stated.


With President Boris Yeltsin's decision to appoint Stepashin as Russian prime minister, the Stepashin report is relevant again today. The questions now are twofold:

--Did Hamilton’s task force behave irresponsibly in 1993 by ignoring and concealing an important piece of evidence in a major federal crime? The evidence indicated that senior Republicans and Iranians conspired to prolong the captivity of kidnapped American diplomats for the purpose of fixing the outcome of a U.S. presidential election.

--Or did the now prime minister of Russia unfairly lodge false allegations, possibly recycled from Western press reports, against presidents Reagan and Bush as well as CIA directors Casey and Gates?

The answers could be important not only as a test for the health of the Russia's democratic institutions but those of America as well. 

[For details on the House task force report and its unusual logic, see Robert Parry’s Trick or Treason. For the full text of Stepashin’s report, see Parry’s The October Surprise X-Files.]

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