Secretary of State George P. Shultz yesterday portrayed President Reagan as the active force behind the Iran arms sales from their outset until well after the controversy exploded last November, and said Reagan was aware of the details of a controversial 1985 arms shipment to Iran despite his repeated public denials.

Shultz also portrayed Reagan as gripped by frustration over the American hostages in Lebanon. Shultz recalled a pivotal meeting on Dec. 7, 1985, when Defense Secretary Caspar W. Weinberger raised legal questions about whether to proceed with shipments to Iran and Reagan responded, "Well, the American people will never forgive me if I fail to get these hostages out over this legal question."

The secretary's comments to the Iran-contra panel appeared to conflict with and undermine a number of statements that Reagan has made publicly about the Iran arms sales and his justification for going ahead with them.

Moreover, Shultz described an episode after he had been given control over the Iran policy last December, in which Reagan restored then-CIA Director William J. Casey as a player in the Iran policy when Shultz thought Casey had been dropped.

In describing Reagan's knowledge of the 1985 shipment, Shultz testified that in the frantic days after the arms sales were exposed, Reagan told him he had known of the Israeli shipment of U.S.-made Hawk missiles to Iran in an exchange that failed to win freedom for the hostages.

Shultz's recollection of what Reagan said about the November shipment conflicts with two different versions Reagan gave to the Tower special review board earlier this year. Shultz's account also casts doubt on remarks Reagan made about the shipment in his news conference last Nov. 19, when he repeatedly said there had been no such shipments.

Shultz testified he went to Reagan right after the news conference to tell the president that he was making misleading statements about not trading arms for hostages, and Shultz said he used the November shipment of Israeli Hawk missiles as an example of such a trade.

"And he said, 'Yes, I knew about that,' or 'I know about that,' or something like that," Shultz testified.

Some of Reagan's public claims that he did not know of the 1985 shipment occurred after the discussion Shultz described he had with Reagan on the issue.

In the Nov. 19 news conference, before he spoke with Shultz, Reagan several times said the United States had not made any arms shipments to Iran until after he signed a document approving them on Jan. 17, 1986, and that the U.S. "did not condone" shipments from other countries. After the news conference, he acknowledged in a brief correction that a "third country" was involved in the shipments.

Reagan also gave a different account to the Tower special review board. In his first meeting with the board, last Jan. 19, "the president said he did not remember how the November shipment came about. The president said he objected to the shipment and that as a result of that objection, the shipment was returned to Israel," according to the board's report.

"In his second meeting with the board on Feb. 11, 1987, Reagan stated that both he and {then-chief of staff Donald T.} Regan agreed that they cannot remember any meeting or conversation in general about a Hawk shipment. The president said he did not remember anything about a callback of the Hawks."

This shipment has become a critical event in the Iran story because of testimony that Reagan signed a secret presidential "finding" authorizing it after the fact, and that finding starkly describes the shipment as a trade of arms for hostages, which Reagan has denied making. The finding was later destroyed by then-national security adviser John M. Poindexter, who said he feared it would embarrass Reagan politically.

Shultz questioned other statements Reagan has made about the Iran initiative. For example, the president has repeatedly cited -- as recently as this spring -- his belief that the Iranians had quelled their involvement in terrorism. But Shultz said he told Reagan that was "wrong."

Shultz testified that Reagan does not believe he authorized an arms-for-hostages deal. But he offered revealing glimpses of Reagan as a president preoccupied with obtaining release of the hostages. At the Dec. 7 meeting, two days after Reagan apparently had signed the finding, Shultz said Reagan appeared "rather annoyed" at him and Weinberger for their opposition to the policy.

"He was very concerned about the hostages, as well as very much interested in the Iran initiative," Shultz said. At the meeting, the secretary said, Reagan made the comment about Americans not forgiving him if he did not obtain the release of the hostages. "And you could feel his sense of frustration," Shultz said.

Later, after the Iran initiative became known and highly controversial, Reagan was saying that he did not trade arms for hostages, but Shultz said he told Reagan, "that isn't the way it worked, at least insofar as I can see."

Shultz portrayed Reagan as still willing to move ahead with the Iran deal in early November. He told how he had tried to get Reagan to approve a statement he had drafted calling off all arms sales to Iran. Shultz said he tried but failed to persuade the president, through Regan, to accept the statement, and he lamented his statement in a television interview a few days later that he did not speak for the administration.

Although the White House then put Shultz in charge, the secretary said Reagan agreed to Casey's request to significantly alter the ground rules for a meeting with the Iranians in December, without telling Shultz.

Staff writer Walter Pincus contributed to this report.