SEC. RICE: Well, I think General Pace has spoken to what we think the necessity is and what it is we intend to do. We've made very clear to the Iranian government and the Syrian government, for that matter, that we don't expect them to continually engage in behavior that is destabilizing to the Iraqi government but also that endangers our troops, and that we will do what is necessary for force protection.

But we leave to those who deal with issues of force protection how these raids are going to be taken out (sic). I think you've got an indication of that in what has been happening, which is the networks are identified, they are identified through good intelligence, they are then acted upon. It is without regard to whoever is in them, whatever the nationality. And we're going to protect our troops.

“Obviously, the President isn’t going to rule anything out to protect our troops, but the plan is to take down these networks in Iraq.I do think that everyone will understand that—the American people and I assume the Congress expect the President to do what is necessary to protect our forces.”

In the past few months, as the situation in Iraq has deteriorated, the Bush Administration, in both its public diplomacy and its covert operations, has significantly shifted its Middle East strategy. The “redirection,” as some inside the White House have called the new strategy, has brought the United States closer to an open confrontation with Iran and, in parts of the region, propelled it into a widening sectarian conflict between Shiite and Sunni Muslims.

To undermine Iran, which is predominantly Shiite, the Bush Administration has decided, in effect, to reconfigure its priorities in the Middle East. In Lebanon, the Administration has coöperated with Saudi Arabia’s government, which is Sunni, in clandestine operations that are intended to weaken Hezbollah, the Shiite organization that is backed by Iran. The U.S. has also taken part in clandestine operations aimed at Iran and its ally Syria. A by-product of these activities has been the bolstering of Sunni extremist groups that espouse a militant vision of Islam and are hostile to America and sympathetic to Al Qaeda.

One contradictory aspect of the new strategy is that, in Iraq, most of the insurgent violence directed at the American military has come from Sunni forces, and not from Shiites. But, from the Administration’s perspective, the most profound—and unintended—strategic consequence of the Iraq war is the empowerment of Iran. Its President, Mahmoud Ahmadinejad, has made defiant pronouncements about the destruction of Israel and his country’s right to pursue its nuclear program, and last week its supreme religious leader, Ayatollah Ali Khamenei, said on state television that “realities in the region show that the arrogant front, headed by the U.S. and its allies, will be the principal loser in the region.”

After the revolution of 1979 brought a religious government to power, the United States broke with Iran and cultivated closer relations with the leaders of Sunni Arab states such as Jordan, Egypt, and Saudi Arabia. That calculation became more complex after the September 11th attacks, especially with regard to the Saudis. Al Qaeda is Sunni, and many of its operatives came from extremist religious circles inside Saudi Arabia. Before the invasion of Iraq, in 2003, Administration officials, influenced by neoconservative ideologues, assumed that a Shiite government there could provide a pro-American balance to Sunni extremists, since Iraq’s Shiite majority had been oppressed under Saddam Hussein. They ignored warnings from the intelligence community about the ties between Iraqi Shiite leaders and Iran, where some had lived in exile for years. Now, to the distress of the White House, Iran has forged a close relationship with the Shiite-dominated government of Prime Minister Nuri al-Maliki.

The new American policy, in its broad outlines, has been discussed publicly. In testimony before the Senate Foreign Relations Committee in January, Secretary of State Condoleezza Rice said that there is “a new strategic alignment in the Middle East,” separating “reformers” and “extremists”; she pointed to the Sunni states as centers of moderation, and said that Iran, Syria, and Hezbollah were “on the other side of that divide.” (Syria’s Sunni majority is dominated by the Alawi sect.) Iran and Syria, she said, “have made their choice and their choice is to destabilize.”

“It seems there has been a debate inside the government over what’s the biggest danger—Iran or Sunni radicals,” Vali Nasr, a senior fellow at the Council on Foreign Relations, who has written widely on Shiites, Iran, and Iraq, told me. “The Saudis and some in the Administration have been arguing that the biggest threat is Iran and the Sunni radicals are the lesser enemies. This is a victory for the Saudi line.”

The Bush Administration’s reliance on clandestine operations that have not been reported to Congress and its dealings with intermediaries with questionable agendas have recalled, for some in Washington, an earlier chapter in history. Two decades ago, the Reagan Administration attempted to fund the Nicaraguan contras illegally, with the help of secret arms sales to Iran. Saudi money was involved in what became known as the Iran-Contra scandal, and a few of the players back then—notably Prince Bandar and Elliott Abrams—are involved in today’s dealings.

Iran-Contra was the subject of an informal “lessons learned” discussion two years ago among veterans of the scandal. Abrams led the discussion. One conclusion was that even though the program was eventually exposed, it had been possible to execute it without telling Congress. As to what the experience taught them, in terms of future covert operations, the participants found: “One, you can’t trust our friends. Two, the C.I.A. has got to be totally out of it. Three, you can’t trust the uniformed military, and four, it’s got to be run out of the Vice-President’s office”—a reference to Cheney’s role, the former senior intelligence official said.

I was subsequently told by the two government consultants and the former senior intelligence official that the echoes of Iran-Contra were a factor in Negroponte’s decision to resign from the National Intelligence directorship and accept a sub-Cabinet position of Deputy Secretary of State. (Negroponte declined to comment.)

[...]

The government consultant said that Negroponte shared the White House’s policy goals but “wanted to do it by the book.” The Pentagon consultant also told me that “there was a sense at the senior-ranks level that he wasn’t fully on board with the more adventurous clandestine initiatives.” It was also true, he said, that Negroponte “had problems with this Rube Goldberg policy contraption for fixing the Middle East.”

The Pentagon consultant added that one difficulty, in terms of oversight, was accounting for covert funds. “There are many, many pots of black money, scattered in many places and used all over the world on a variety of missions,” he said. The budgetary chaos in Iraq, where billions of dollars are unaccounted for, has made it a vehicle for such transactions, according to the former senior intelligence official and the retired four-star general.

“This goes back to Iran-Contra,” a former National Security Council aide told me. “And much of what they’re doing is to keep the agency out of it.” He said that Congress was not being briefed on the full extent of the U.S.-Saudi operations. And, he said, “The C.I.A. is asking, ‘What’s going on?’ They’re concerned, because they think it’s amateur hour.”

HERSH: ...And in looking into that story, and I saw him in December, I found this. That we have been pumping money, a great deal of money, without congressional authority, without any congressional oversight, Prince Bandar of Saudi Arabia is putting up some of this money, for covert operations in many areas of the Middle East where we think that the — we want to stop the Shiite spread or the Shiite influence.

They call it the "Shiite Crescent." And a lot of this money, and I can't tell you with absolute certainty how — exactly when and how, but this money has gotten into the hands — among other places, in Lebanon, into the hands of three — at least three jihadist groups.

There are three Sunni jihadist groups whose main claim to fame inside Lebanon right now is that they are very tough. These are people connected to al Qaeda who want to take on Hezbollah. So this government, at the minimum, we may not directly be funneling money to them, but we certainly know that these groups exist.

[...]

We are simply in a situation where this president is really taking his notion of executive privilege to the absolute limit here, running covert operations, using money that was not authorized by Congress, supporting groups indirectly that are involved with the same people that did 9/11, and we should be arresting these people rather than looking the other way…