DCI TESTIMONY BEFORE THE HOUSE APPROPRIATIONS COMMITTEE

Created: 12/8/1986

OCR scan of the original document, errors are possible

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DCI TESTIMONY BEFORE THE HOUSE APPROPRIATIONS COHMITTEE

ASESTIFIED BEFORE OUR TWOCOMMITTEES OHOVEMBER, IT WASN'T UNTILLATER, AT THE END OF THE DAY ON MONDAY, THAT ITHE PRESIDENT'S CHIEF OF STAFF THAT THED EVIDENCE THAT SOME OF THE IRANIAN FUND,FOR ARKS PURCHASES MAY HAVE BEEN DIVERTED TO AS YOU KNOW. ON THE NEXT DAY THE PRESIDENTADMIRAL POINDEXTER AND LIEUTENANT COLONEL NORTHFROH THE NSC

RIGHT NOW, HY INSPECTOR GENERAL IS PJLLINGROAD AND SYSTEMATIC REPORT ON CIA'S INVOLVEMENT IN THE IRANIAN OPERATION. AN TELL YOU THAT THEAVE OUR OVERSIGHT COMMITTEES ONOVEMBER REMAINS ACCURATE ON WHAT WE KNEW AT THAT TIME. AN ALSO TELL YOU THAT CIA WAS NOT INVOLVED IN AHY DIVERSION OF IRANIAN FUNDS.

BEFORE6IVE YOU THE ESSENTIALS OF CIA'S INVOLVEMENT, I'D LIKE TOETH1H6 ABOUT THE RATIONALE BEHINDPERATION. OVER THE'LAST FIVE YEARS. HUCH THOUGHT AND EFFORT HAS BEEN DEVOTED TO HOW WE MIGHT DEVELOP CONTACTS AND RELATIONSHIPS WHICH WOULDETTER UNDERSTANDING OF ^

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WHAT WAS HAPPENING THERE AND HOW WE MIGHT ESTABLISH CONTACTS AND RELATIONSHIPS HHftH COULD LEAD TO IHPftOYED RELATIONSHIPS LATER ON,

THE EARLY FALLUD McFARLANE, AFTEjt ONE OF THE WEEKLYHICH HE AND HIS DEPUTY HAD WITH HE AND rtY DEPUTY, ASKED HE TO STAY BEHIND. HE TOLD HE ABOUT"DISCUSSIONS

HCFARLANE EHPHASIZIN6 THAT THE PURPOSE OF SUCH DISCUSSIONS WOULD BE THE FUTURE RELATIONSHIPS WITH IRAK AND IRAN'S 6REAT IMPORTANCE IN THE EAST-WEST AND MDDLE EAST-PERSIAN GULF EQUATION.

CIA'S INVOLVEMENT IN THE OPERATION BEGAN ON FRIIJAY,

AT THAT TIME LIEUTENANT COLONEL NORTH ASKEDINELIABLE COMMERCIAL CARRIER THAT COULDTO AN UNSPECIFIED MIDDLE EASTERN DESTINATION, HEIHE NAMEIA AIRROPRIETARY IN EUROPEACCEPTS NORMAL COMMERCIAL BUSINESS, OURTOLD BY NORTH THAT THE CARGO HAS TO BE OIL FIELD OUR PROPRIETARY HAS SO INFORMED BY HEADQUARTERS,

OUR PROPRIETARY DID INDEED FLY TO TEL AVIV ON SATURDAY,

NOVEMBER. FROH THERE ITO IRAN ON

NOVEMBER. TO THE BEST OF OUR KNOWLEDGE, NEITHER THE ISRAELIS NOR THE IRANIANS KNEW THEY HEM DEAL 1H6^ PROPRIETARY. IT HAS NOT UNTIL AFTETm^ ANYONE IN CIA MANAGEMENT WAS.AWARE THAT THE CARGO WAS ANYTHINGjl DRILLING EQUIPMENT AS HAD BEEN REPRESENTED TQ

Them, the"airline was paid at the normal commercial rate which amounted to

i was out of the country at the time. the acting dci, john mcmahon, did not learnia proprietary flight from israel to tehran had occurred until monday morning,

he then immediately informed the cia'sand directed that we would not facilitateinto iran in the absenceresidential finding.

THE FOLLOWING DAY,OVEMBER, J. RETURNEDRAFT FINDING WAS PREPARED BY OUR 6ENERAL COUNSEL'S OFFICEENT IT TO THE WHITE HOUSE FOR CONSIDERATION AMD APPROVAL.

THIS EPISODE TOOK PLACEEEKEND AND UNDERCIRCUMSTANCES. LTC NORTH HAD ALSO INFORMED US THATMEETIN6 WAS UNDERWAY IN GENEVA THAT WEEKENDOFFICIALS AND THE POSSIBLE RELEASE OF HE MADE IT CLEAR THAT HIS REOUEST FORWAS RELATED TO THIS MEETIH6. AT THE TIME, WE SAWTO STOP WHAT CLEARLY VAS AN ONGOING/ SENSITIVEBY DENYING THE USE OF OUR PROPRIETARY AIRLINE ON^^UaT^nfarUfAsi

THE DRAFT FINDIH6 WE HAVE PROVIDED THE WHITE HOUSEAND REVISED OVER THE NEXT FEW WEEKS. FINDING FINALLY SIGNED ONIA TO PROVIDE SUPPORTR06RAHORE MODERATE GOVERNMENT INjlIu^OBTAINING INTELLIGENCE TO DETERMINE THE CURRENTINTENTIONS WITH RESPECT TO ITSRS AND WITHTO TERRORIST ACTS,URTHERING THE RELEASEHOSTAGES HELD IN BEIRUT AND PREVENTING FURTHER CTS BY THESE

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IT WENT ON TO:SAY-THAT THE US6 WOULD PROVIDE MODERATE ELEMENTS WITHIN AND WITHOUT TBE GOVERNMENT OF IRAN WITH ARMS, EQUIPMENT AND RELATED MATERIEL IN ORDER TO ENHANCE CREDIBILITY OF THESE ELEMENTS IH THEIR EFFORTS TOORE. GOVERNMENT-IN IRANEMONSTRATING THEIR ABILITY TO OBTAIN RESOURCES TO DEFEND THEIR COUNTRY. IT WAS PROVIDED THAT SUPPORT WOULD BE DISCOHTINUED IF. GOVERNMENT LEARNS THAT THESE ELEMENTS HAVE ABANDONED THEIR GOALS OF MODERATING THEIR GOVERNMENT AND APPROPRIATED THE MATERIEL FOR PURPOSES OTHER THAN THAT PROVIDED BY THIS FINDINfi.

IN THE FINDING, THE PRESIDENT DIRECTED THE CIA TO REFRAIN FROH REPORTING THE FINDING TO THE CONGRESS UNTIL OTHERWISE DIRECTED. THE FINDING WAS REVIEWED AND CONCURRED IN BY THE ATTORNEY 6ENERAL,

AT THE TIME THE PRESIDENTIAL FINDING WAS BEING DRAFTED. THE CIA'S OFFICE OF 6ENERAL COUNSEL PROVIDED THE LESAL OPINION THAT THE PRESIDENT-HAS THE AUTHORITY TO WITHHOLD PRIOR NOTICE OF OPERATIONS FROM THE CONGRESS. F THE NATIONAL SECURITY ACT EXPRESSLY PROVIDES THAT NOTIFICATION OF INTELLIGENCE ACTIVITIES TOESS SHALL BE PROVIDED "TO THE EXTENT CONSISTENT WITH ALL APPLICABLE AUTHORITIES AND DUTIES, INCLUDING THOSE CONFERRED BY THE CONSTITUTION."

THE ACT ALSO STATESMlTfEESNFORMED OF ACTIVITIES FOR WHICH NO PRIOR NOTICE WAS GIVEN AT THE APPROPRIATE TIME AS DETERMINED BY THE PRESIDENT. INTELLIGENCE COMMUNITY LAWYERS HAVE ALWAYS HELD THAT EXTRAORDINARY CIRCUMSTANCES COULD LEAD THE PRESIDENT TO CONCLUDE THAT NOTICE OF AN OPERATION SHOULD BE WITHHELD. IN WHOLE OR IN PARTERIOD DEPENDIN6 ON THE CIRCUMSTANCES DETERMINED BY THE PRESIDENT. IN THIS INSTANCE, THE PRESIDENT DETERMINED THAT IF THE FACT OF THIS PROGRAM 3ECAME KNOWN, THOSE CARRYING OUT THE DIALOGUE. AND IRANIAN) AND THE'* AMERICAN HOSTAGES IN LEBANON WOULD BE PUTREATER RISK.

HOW LET ME GO OVER THE ACTIVITIES THAT WERE UNDERTAKEN BY THE CIA IN CARRYING OUT THE DIRECTIVESHE FINDING OF .EPRESENTATIVE OF THE ISRAELI PRIME HINISTRY,ENIOR-LEVEL IRANIAN OFFICIAL MET IN GERMANY. AT THIS. SIDE EMPHASIZED ITS DESIRE TO ENTERTRATEGIC DIALOGUE WITH THE IRANIAN SIDE. THE IRANIANS RAISED THEIR DESIRE TO. WEAPONS. . AGREED TO EXPLORE THIS POSSIBILITY. KIH6 WITH THE ISRAELIS, THE FOLLOWING MECHANISM FOR TRANSFER OF THE WEAPONS WAS ESTABLISHED:

IRANIAN INTERMEDIARY WOULD DEPOSIT FUNDS IN AN ISRAELI ACCOUNT.

FUNDS WOULD THEN BE TRANSFERREDTERILE ACCOUNT IN AN OVERSEAS

USINSTHESEHr CIA would work with theCOMMAND TO OBTAIN THEMATERIEL WOULD THEN BE TRANSPORTED TO ISRAEL

THE DEPOSITS OF IRANIAN HONEY IN OUR SWISS ACCOUNTS WERE TIMED TO COVER THE ESTIMATED COSTS OF PREPARATION AND DELIVERYOTALOW MISSILESARIETY OF HAWK MISSILE EQUIPMENT. ALL OF THIS WAS ACQUIRED FROM THE DEPARTMENT OF DEFENSE. HONE OF THE WEAPONS CAME FROM CIA STOCKS.

- ONEBRUARY, WEOW MISSILESAIR FORCE BASE FOR SHIPMENT. THESE WEAPONSPICKED UP AT REDSTONE ARSENAL, TRUCKED HEN TRANSPORTED TO KELLY

WHERE WE SURRENDERED CONTROL. THIS SET OF WEAPONS -TOGETHER WITH CHAR6ES FOR GROUND TRANSPORTATION,

GUARDS. THE SERVICES"OF"bV^WtTrtE^fFdCALA:i? POINT.OFFICERS, ANDS ESTIMATED TO HAVE5 MILLION. .

ONAY. WEOW MISSILES AND HAWK SPARE PARTSADAR) TO KELLY AIR FORCE BASED FOR SHIPMENT. THESE WEAPONS HAD BEEN TRUCKED FROM REDSTONE ARSENAL TO KELLY AIR FORCE BASEjflgp

"HERE THEY WERE PREPARED FOR TRANSIT.

THI^^itTPHEHT IS ESTIMATED TOHE COST OF THE WEAPONS,THE SERVICES OF DEPARTMENT OFPOINT OFFICERS, AND6 NOVEMBER, WE PREPARED AMD TRANSPORTEDOW MISSILESHALL AMOUNTSUPPLIES. AS WITH ALL OF THE OTHERWEAPONS WERE TRANSPORTED FROM REDSTONE TO KELLY"THE MEDICAL

% SUPPLIES WERE PURCHASED INND SAN ANTONIO, THEN PACKED FOR SHIPMENT FROM KELLY AIR FORCE BASE. THE ESTIMATED CbST OF THIS SHIPMENT9 MILLION. IN THIS INSTANCE, AND IN

THIS INSTANCE ONLY, THE ESTIMATED COST ALSO INCLUDES CHARGES. AIRO FLY THE SHIPMENT FROM KELLYORCE BASE TO 6ERMAHY AND THE COSTSLANE OWNEDIA PROPRIETARY, WHICH TOOK THE SHIPMENT FROH GERMANY TO ISRAEL.

- THER EXPENSES TO PREPARE THE TOW MISSILES ANDADAR. ALLF THESE ESTIMATED COSTS WERE INCURRED. ARMY REGULATIONS REQUIRE THAT TOW MISSILES PRODUCEDERTAIN DATE MUST BE RETROFITTED BEFORE THEY CAN BE WITHDRAWN FROM STOCKS, THE REQUIRED CHANGES WERE HADE AT AN ARMY DEPOT IN ANHISTON, ALABAMA.

CIA OBTAINED QUOTES FOR THE COSTS OF THE TOW MISSILES'AND HAWK EQU1PHENT THROUGH THE' DEPARTMENT OF DEFENSE FOCAL POINT SYSTEM. WE THEN ADDED ESTIMATES FOR OTHER ASSOCIATED EXPENSES. TO DATE, WE HAVE ONLY PAID CIA'S COSTS FOR PREPARING AND TRANSPORTING THE EQUIPMENT AND ACQUIRING THE MEDICAL SUPPLIES (WHICH TOTAL)INGLE BILLING FROM DEPARTMENT OF DEFENSE5 MILLION. ALL OTHER BILLING FROM DEPARTMENT OF DEFENSE IS STILL PENDING. IF OUR ESTIHATES ARE ACCURATE,0 OF THE IRANIAN FUNDS WILLFTER ALL BILLS ASSOCIATED WITH THE OPERATION ARE PAID. WE CLOSED THE SWISS BANK ACCOUNT(ASSOCIATED WITH THE IRANIAN OPERATION OHOVEMBER. AS OF THAT DATE, NO FUNDS ASSOCIATED WITH THE IRANIAN OPERATION ARE HELD IN ANY CIA-COiJTROLLED BANK AtCOUitt IN SWITZERLAND.

IN ADDITION TO THEUST DESCRIBED, CIA ALSO

PROVIUED TO THE NSC INTELLIGENCE SUPPORT AND TRANSLATION AND

to-*

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' ANALYTICAL SUPPORT,IA ANNUITANT MHO MASTHE NSC PROJECT. OUR ANNUITANT AND ANOTHER OF OURINBETWEEN THE UNITED

STATES SIDE/ THE INTERMEDIARIES, AND THE IRANIAN SIDE.

A TOTALH APPROPRIATED CIA FUNDS WERE USED IN SUPPORT OF THIS ACTIVITY.

-- STAFF EXPENSES (CHIEFLY TRAVEL AND TDY COSTS)

INDEPENDENT CONTRACTOR COSTSFOR TRAVEL AND TDY EXPENSES OF THE RETIRED ANNUITANT WHO WAS INVOLVED IN THE OPERATION).

OPERATIONAL SUPPORT COSTSOR IxPENSES ASSOCIATED WITH MEETING IN EUROPE (INCLUDING HOTELS, -MEALS, TELEPHONES, AND MISCELLANEOUS OPERATIONAL EXPENSES).

USE OF AN AIRCRAFT OWNEDIAHAT. CARRIED. TEAM ON THEISRAEL LEGRIP TO IRAS.

. SINCE ALL TRAVEL BY CIA OFFICIALS IS ROUTINELY CHAR6ED TO SUCH ACCOUNTS, TO DO OTHERWISE IN THE CASE OF THE TRIPS UNDERTAKEN DURING THIS PR06RAM WOULD HAVE COMPROMISED THE SECURITY OF THE ACTIVITIES.

At

, LET HE CONCLUDE BY TELLIN6 YOU WHAT WE mi -MONTHS AGO ABOUT POSSIBLE IRREGULARITIES IN THE OPERATION AND WHAT WEUT IT.^FIRST, IT IS IMPORTANT TO UNDERSTAND THAT THE NSC'S OPERATION HADRITICAL AND SENSITIVE PHASE BY THIS FALL. TWO OF OUR HOSTAGES ALREADY HAD BEEN RELEASED BENJAMIN HEIR IN5 AND FATHER JENCO IN JULY OF THIS YEAR. IN SEPTEMBER, THE NSC WAS ABLE TOEW AND DIRECT CHANNEL TO MAJLES SPEAKER RAFSAHJANI, ONCE HE HAD DECIDED THE CHANNEL WAS RELIABLE, THE NSC PROCEEDED IN HI6HLY SENSITIVE NEGOTIATIONS BOTH TO EXPANDD TO TRY TO SECURE THE RELEASE OfwIERlCAK

HOSTAGES IN LEBANON,

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INITIALLY CONCERNED OVER WHETHER. WAS SERIOUS ANDJRjJSTED, BY THE TrtiE/HrTAWO WCR^CQNCLUfiSlf,OINT

COMMITTEE TO EXPLORE HOW TO OPEN RELATIONS 3ETWEEN THE*

and-

TA6ES INg DISCUSSED THE SENIOR IRANIAN OFFICIAL WTCHDUOJHU MCCTIHQ AGftCCD -TO tAVEbVTO LEBANON >IO ASSESS WHETHER AWT?

EHRAN. THAT VISIT^AS PAgrr^Jf" AN* IHTEHS1VEEFFORT TAKING PLACE DURIN6 THE LAST DAYS OF OCTOBER AND THE EARLY DAYS OF NOVEHBER TO GET TWO OR THREE MORETA6ES RELEASED. DAVID JACOBSEH, IN FACT. HAS RELEASEDOVEHBERESULT OF THIS EFFORT.

IN THEJDLC Ur"'ALLELEPHONE CALL FROM ROY.FURHARKAD-DONE SOME LE6AL WORK FOR HIS COMPANY SOMETIME IN THEAD NOT SEEN HIK

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SINCE THEN. FURHARK SAID ON THE PHONE THAT HE HAD SOMETHING IMPORTANT THAT HE WANTED TO INFORM HE ABOUT. AD HIM COME DOWN TO'ROMPTLY. IT QUICKLY EMERGED THAT HE KNEW HORE ABOUT THE NSC PROJECT WITHID. HE HAD BEEN INVOLVED IR IT SINCE5 OR HIS ROLE WAS THAT Of AN ADVISOR AND MEMBER OF THE, STAFF OF ADNAN KHASH06GI. HE HAD WORKElAwlTf^ORBANlFAR ALHOSi FROM THE INCEPTION OF THAT 6ENTLEHAN'S EFFORT TO DEVELOP AN AMERICAN-IRANIA^RELATIONSHIP. THE OCCASION OF HIS VISIT TO HE WAS HIS CONCERN THAT HE ANDADETHER CANADIAN INVESTORS TO PUT UP MILLIONS OF DOLLARS TO FINANCE THE ARHS SALES BY. AND IRAN. HE TOLD ME THAT THE CANADIAN INVESTORS WERE STILLETHIN6ILLION AND WERE AROUSED BY THEIR INABILITY TO COLLECT THE MONEY THEY HAD ADVANCED. HEEY INTENDED TO BRING FORMAL LEGAL ACTION TO RECOVER THEIR MONEY. HE WAS CONCERNED THAT THIS WOULD DESTROY PROSPECTS OF GETTING ADDITIONAL HOSTAGES OUT. THIS WAS ALL ENTIRELY NEW TO ME. HANKED HIM FOR THE INFORMATION AND SAIDOULD CHECK INTO THE SITUATION.

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THAT SAMEALLED ADMIRAL POINDEXTER AND REPORTED THIS ALARMING INFORMATION TO HIM. HE SEEMED SURPRISED AND CLEARLY CONCERNED. IT WAS, IN FACT, OBYlfJUS TO BOTH.OF US THAT THIS INFORMATIONAJOR RISK TO THE OPERATIONAL SECURITY OF THE NSC-IRANIAN INITIATIVE. EITHER OF US AT THE TIME WAS SURE ABOUT THE ACCURACY OF -THE .

o^B'Sirt'TO fif&ARlC OMPRETULLY COVERING ALL ASPECTS OF THE IRANIAN INITIATIVE AND TO CONSULT. WITH THE WHITE HOUSE LAWYERS ON HOW TO HANDLE IT.

I INFORMED DEPUTY DIRECTOR BOB 6ATES AND CHARLESNATIONAL INTELLIGENCE OFFICER FOR COUNTERTERRORISH,PROVIDED INTELLIGENCE SUPPORT TO THE MSG'S IRANTHE BE6INNING. SKED ALLEN TO PREPARE ALAYING OUT OUR CONCERNS AT THAT POINT ABOUT THEAND ARRANGED FOR HIM TOP TO NEW YORK TOINTO THEMOUNT OF INFORMATION WHICH FURHARK THE NEXTEMORANDUM TO THEOUR NEAR EAST DIVISION REP0RTIN6 BRIEFLY THEFROM

CTOBER, THE DDCIET WITH LIEUTENANT COLONELORTH WHO HAD COHE OUT TO BRIEF US ON RECENTf^N.OINTEDLY ASKED COLONEL NORTH IF HE HAD ANY KNOWLEDGE OF CIA

INVOLVEMENT IH THIRD PARTY SUPPORT EFFORTS TO THE CONTRAS.

COLONEL NORTH REPLIED THAT, BASED ON HIS KNOWLEDGE OF THE

PRIVATE FINANCIAL EFFORTS UNDERWAY, CIA.WAS COMPLETELY CLEAN ON THE QUESTION OF ANY CONTACT WITH THOSE INVOLVED.

ONCTOBER, THE DDCIET WITHNDEXTER IN HIS 'OFFICE. WE GAVE HIM THEAD ASKED CHARLIE ALLEN TO PREPARE AND SAT WITH HIM WHILE HE READ IT. WE

REITERATED OURIt&lNSt PROJEC^^AS^ ABOUT TO SPIN OUT OF CONTROL. UGGESTED AGAIN THAT HE CONSULT WHITE HOUSE COUNSEL,

ADMIRAL POINDEXTER EXPRESSED APPRECIATIONEED TO CONSIDER WHAT TO DO, HE SAID THAT HE HAD CONSULTED HIS OWN NSC COUNSEL/ PAUL THOMPSON, ABOUT THE LE6AL.ASPECTS OF THE HATTER. HE INDICATED THAT HE WANTED TOITTLE MORE TIHE BEFORE FOLLOWING OUR RECOMMENDATIONS IN ORDER TO SEE WHETHER ONGOING DISCUSSIONS WITH THE IRANIANS COULD BE MAINTAINED AND PARTICULARLY WHETHER IT HI6HT BE POSSIBLE TO GET ONE OR TWO ADDITIONAL HOSTAGES OUT.

IN TRY INS TO DECIDE HOW HUCH WEIGHT TO PLACE CfH

INFORMATION THAT BE6AN TO SURFACE IN OCTOBER, AND EXACTLY WHAT , TO DO ABOUT IT, WE HAD TOUMBER OF FACTORS. FIRST

iMfaUi^/?

F ALLTsIIl INFORMATIONIVFFSinNUNDS,

AS EXTREMELY DIFFICULT FOR US TO INTERPRET

AND- ESPECIALLY SINCE WE HAD NOfiOfOWLEDGE OF THE

FINANCIAL MECHANICS OF ,THE NSC OPERATION. THE DETAILED NATURE

OF THE INFORMATION FROM HR. FURHARK HAD CONSIDERABLE -IMPACT.

BUT IT WAS STILL LITTLE MORE THAN HEARSAY, SINCE HE WAS SIMPLY

PASSIN6 ON SPECULATION HE HAD HEARD FROM THE IRANIAN MIDDLEMAN

INVOLVED. IT WAS CERTAINLY, IN OUR OPINION, FAR TOO WEAK TO

TAKE TO THE JUSTICE DEPARTMENT.

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IN FACT, HE HERE ALL TAKEN BY SURPRISE BY THE ATTORNEY GENERAL'S STATEMENT OFOVEMBER TO THE EFFECT THAT HE HAD

UNCOVERED GOOD EVIDENCE THAT IRANIAN MONEY HAD BEEN DIVERTED.

HIS STATEMENT MUST BE BASED ON INFORMATION THAT IS STILL UNAVAILABLE-TO US,

INELIEVE THAT WE DID ALL THAT COULD RESPONSIBLY BE DONE GIVEN THE NATURE OF THE INFORMATION WITH WHICH WE WERE DEALING AND THE EXTREMELY CRITICAL PASS IN WHICH WE FOUND OURSELVES IN OUR EFFORTS TO FREE THE HOSTAGES.

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