Los Angeles Times: In its scramble to marshal resources for gathering intelligence on Al Qaeda and Iraq, the CIA shut down a spy ring it was operating in South America that was providing a rare glimpse of the activities of Iranian militants and intelligence networks, according to a former agency official involved in the operation. Los Angeles Times

A spy ring infiltrating militant and intelligence networks based in South America was shut down after Sept. 11, a former CIA official says.

By Greg Miller, Times Staff Writer

WASHINGTON — In its scramble to marshal resources for gathering intelligence on Al Qaeda and Iraq, the CIA shut down a spy ring it was operating in South America that was providing a rare glimpse of the activities of Iranian militants and intelligence networks, according to a former agency official involved in the operation.

The program, which had taken five years to assemble, penetrated Iranian intelligence operations in South America and succeeded to the point that several of the CIA's informants were taken to Iran for religious training, the former official said.

But the operation was dismantled by CIA officials who were skeptical of its value, the former official said, and who were under growing pressure to redeploy agency funds and personnel from South America and other regions seen as less crucial than the nation's expanding war fronts.

Iran's intelligence service has been active in South America for decades, officials said. The decision to pull the plug on the CIA-run program came in 2002, after President Bush had declared Iran part of an "axis of evil" along with Iraq and North Korea, but before the administration made confronting Iran over its nuclear program and its support for terrorist activities a top priority.

The agency has struggled to obtain reliable intelligence on Iran. The official who was involved in managing the spy ring said it was among the few successes the CIA had had in recent years.

"I believe now if we're forced to go back into Iran, we're going to be starting from near zero," the official said, referring to intelligence on the Islamic regime. The Bush administration has recently endorsed European efforts to negotiate with Iran to dismantle its nuclear enrichment program, but has not ruled out the possible use of military strikes or covert operations.

Further, the official said the South American operation had put the CIA in position to learn of plots by Iran and elements of Hezbollah, which were linked to attacks against Jews in South America during the 1990s.

"I will not say we stopped a terrorist act but will say we were in close enough that had one been planned, we would have had that opportunity," said the official, who spoke on condition of anonymity because of the sensitivity of the subject.

CIA officials declined to discuss details of the operation, but disputed the suggestion that the agency had sacrificed a successful or potentially valuable program.

A CIA spokesman said the agency "did not stop or scale back any worthwhile clandestine collection effort against Iran as a result of a realignment of agency resources in support of the war on terrorism or intelligence collection efforts in Iraq."

Former CIA officials also defended the agency's decisions, while acknowledging difficult choices in the last four years as the agency was stretched to its limits by U.S. involvement in Afghanistan, Iraq and elsewhere. The former officials said many programs were curtailed or killed as the CIA "surged" from one conflict to another.

"We faced some really tough budget issues, and we had to do some tough prioritization on some things," said James L. Pavitt, who retired last year as head of the CIA's clandestine service.

Pavitt said that he could not discuss specific operations and that he was not familiar with the South American venture. But he expressed skepticism that a high-value program — particularly one that was aimed at gathering intelligence on Iran — had been axed.

"The fact of the matter is that anything that had genuine merit that was of critical import, we would have struggled but found a way to continue," Pavitt said. "If it was of marginal input or import, it would have been looked at harshly."

He added: "That's not to say that there weren't some mistakes made, things stopped that should have been kept."

Several current and former officials said that South America, Africa and Europe were areas where CIA operations were particularly vulnerable to cuts.

Stations in South America and Africa were sometimes left so threadbare that the agency had to resort to what one former high-ranking official called "circuit riding." The term refers to a practice in which stations and bases in certain regions are all but shuttered, with agency operatives visiting periodically to meet with sources and make payments.

"We borrowed from Peter to pay Paul," said the former high-ranking official, who left the agency last year and spoke on condition of anonymity. Because of the agency's intelligence priorities, he said, "you're going to take more people out of Paraguay than you are out of Moscow or Beijing."

The spy ring in South America targeting Iran was an early casualty.

Because the United States does not have diplomatic relations with Iran, and the country is considered a "denied" territory by the CIA, the agency has had to undertake other means to gather intelligence on Tehran. In places with large Iranian populations, such as Los Angeles, the CIA has sought to recruit immigrants who still travel to Iran or have relatives there.

The South American operation relied on a network of South American nationals who had been placed on the CIA payroll after having attracted the interest of suspected Iranian intelligence operatives in the region.

"They were in touch with Iranians of interest, Hezbollah, and they were just ripe to being recruited [by the CIA"> and 'run' in some way," said the former agency official involved in the operation.

Iran and its spy service, the Ministry of Intelligence and Security, have long had a significant presence in South America. U.S. intelligence officials said the region's lax border security and active trade routes were attractions to an Islamic republic eager to use illicit means to acquire technology and materials that the country could not otherwise get because of restrictions on trade with the United States and other nations.

Iranian "trade delegations" travel extensively through the continent, officials said.

"Most check in through Bogota, spend time in Colombia, and travel to Ecuador, Peru, Argentina, Chile and the tri-border area" shared by Peru, Bolivia and Paraguay, the former CIA official said. The tri-border area is home to a large Shiite Muslim community.

Hezbollah, the militant, Iranian-backed Islamic organization, also has a significant presence in South America, officials said. The organization, which is a potent political force in Lebanon, is considered by some experts to be among the most dangerous terrorist groups in the world.

Iran and Hezbollah are believed to have used South America as an operational and recruiting base for at least two decades. Iran was suspected of involvement in devastating attacks in the 1990s, including the 1994 bombing that killed more than 80 people at a Jewish community center in Buenos Aires and a 1992 attack that destroyed the Israeli Embassy and killed 29 people in that city.

Some experts believe that Iran and Hezbollah could use recruits in South America to penetrate the United States.

"They're looking for converts, operatives," said Mike Scheuer, a former CIA counter-terrorism official. "If you can convert an Argentine to be a Shia Muslim, he's not going to look like a Shia, and it's going to be much easier to get into the U.S. with an Argentine passport than from Ghana or Egypt or somewhere else."

Over a period of several years, the CIA assembled a group of South American informants who were in contact with Iranians there. "We dangled our people out there and the Iranians recruited us," the former official said.

Some were seen as valuable by the Iranians because of their business or government contacts, the former CIA official said.

Others "were not viewed as the brightest and were not politically connected, but were there to carry out an operational need, be it a procurement or a terrorist operation," the former official said. "They were like the goons that were going to get tasked."

A number of the informants increasingly gained the trust of the Iranians they were in contact with, to the point that several were taken to Qom, a holy city in Iran, for religious study, the former official said.

The program was seen as a valuable source of information on Iranian procurement efforts in South America, Hezbollah cells in the region, and the methods and activities of Tehran's intelligence service.

"We saw technology transfers, money transfers, false documents," the former official said. "I don't know whether it would have been good for internal intelligence inside Iran. But given that Iran is such a tough nut to crack, it was amazing to me how successful this was."

The program survived CIA funding cuts in the late 1990s when there were hopes for a thaw in relations between the United States and Iran, but the CIA's stations in South America banded together to provide continued funding.

"Then 9/11 happened and I was just told to shut it down," said the former CIA official. The agency's informants, who had been operating under false identities, were "dropped without protection."

The former official who described the operation retired from the agency last year and cited frustration with the decision to close the South American program as a reason for discussing it.

The official discussed the matter in telephone interviews, expanding on an account first provided to the KNBC television station in Los Angeles. Other CIA officers vouched for the source's credibility and confirmed the official's role in South America.

The demise of the South American operation underscores the triage-like environment at the agency in recent years, former officials said.

The post-Sept. 11 mobilization was the first in a wave of taxing deployments. In both Afghanistan and Iraq, the agency began by seeking volunteers from its stations around the world and in the United States. Such efforts quickly proved inadequate, officials said, and the agency resorted to a series of "drafts."

"Each division had to cough up a number of bodies," said Lindsay Moran, a former CIA case officer who left the agency in 2003.

At first, stations in various regions were instructed to send at least one case officer, but subsequently, there were demands for more people.

"In Afghanistan, they were a little more discerning about who they sent over, mainly special operations guys and guys with military backgrounds," Moran said.

As the buildup for war in Iraq got underway, "we had this situation where the job really wasn't done in Afghanistan, and they started pulling people back from Afghanistan and sending them to Iraq."

After Iraqi President Saddam Hussein was toppled, the agency continued to send people to its Baghdad station even as the environment became so dangerous that they were sometimes unable to leave their secure compounds.

"One colleague [in Baghdad"> wrote me and asked me to send the whole series of 'Sex and the City' because she had nothing to do," Moran said.

Other agency officials defended the deployments but acknowledged that the agency's presence on other continents had been significantly eroded.

To meet the enormous demand for case officers in Afghanistan, in Iraq and at agency headquarters, the CIA relied on a combination of reducing its forces in certain areas — particularly South America and Africa — and rehiring large numbers of agency retirees.

A former high-ranking CIA official involved in deployment decisions said the agency at various times had to redeploy as many as 1,000 people, including case officers, analysts and support staff.