Iran deal clouds future of contra funding

Revelations this week that money from the Iran arms sale ended up with the Nicaraguan contras is a severe political reverse for them, sources close to the rebel leaders say. Most critical in the long term, these sources add, is the limbo into which the scandal has thrown the rebels' prospects for further funding. For the crisis has both damaged the contras' chances of securing more money from the United States Congress next year and removed the key player in rebel efforts to garner private funds - Lt. Col. Oliver North, a National Security Council aide, they point out.

``This is going to be a very serious setback,'' says one source close to leaders of the rebel organization, the Unified Nicaraguan Opposition (UNO). ``No doubt Managua is confident'' that the Reagan administration and the contras have been weakened.

Although President Reagan's policy of support for the contras has never been widely popular in Congress, the White House commanded enough muscle to win approval for $100 million in rebel aid earlier this year.

Now that the contra issue has been linked to the unpopular Iran deal, congressional aides say, that muscle has been badly weakened.

``The $100 million was not enough for the opposition to show real political or military gains in the short or medium term,'' argues Alvaro Jer'ez, a leader of the Costa Rican-based Southern Opposition Bloc (BOS) contra group. ``The danger is that Congress will say `Why continue with aid to the contras, if they are not worth anything?,''' when the next aid vote comes up in February, Mr. Jer'ez says.

That vote on whether to release the last portion of the $100 million will depend, among other things, on how much civilian control over contra military affairs Congress determines there is. Such an assessment is required under the funding law. That control looks somewhat tenuous, political observers in the US point out, since contra leaders of all stripes deny they knew anything about the $10 million to $30 million profit from the arms sale deposited in a Swiss bank account.

If Congress cut off aid, ``we would have to seek alternative money from other governments and private sources,'' said Washington-based UNO spokesman Ernesto Palacios, before the Iran connection came to light.

But the network that might provide such funds could prove dry, one source close to UNO worries. ``It's a problem of deterioration in the contras' image,'' he says.

At the same time, says Jer'ez, the firing of Colonel North, who masterminded the contras' private aid flow when congressional funds were cut off in 1984, is a serious blow to the rebels.

North's departure and the National Security Council's now-tarnished image, Jer'ez hopes, may lead to a preeminent role for the State Department in setting US policy toward Nicaragua.

``This would mean more coherence in US policy,'' he says. ``That could be one of the few positive elements of the Iran scandal, because the State Department agrees with BOS that we have to make more political and diplomatic efforts along side the military struggle.''

Sources close to the Unified Nicaraguan Opposition predict that such a change in policy could mean a shift in the balance of power within the group, which so far has been dominated by Adolfo Calero, the leader of the contras' largest military force, the Nicaraguan Democratic Force (FDN).

Mr. Calero denies knowing about the Iran arms money. But ``that denial probably won't stick'' in the face of scrutiny, says one Democratic congressional aide.

And, contra sources say, since Calero's strength over fellow UNO leaders, Arturo Cruz and Alfonso Robelo, has derived in large part from his control over secret funds, the scandal over such funds can only weaken the FDN leader's position.

``I think that you have to have a shake-up in the contras this time,'' says a political analyst close to the Cruz faction of UNO. ``But the problem is the high price of all this,'' he worries. ``You could be throwing the baby out with the bath water.''