President Reagan has decided to order the declassification of a controversial memo to Attorney General Edwin Meese III in which Meese's close friend, E. Bob Wallach, allegedly describes a plan to make payments to the Israeli Labor Party to cement guarantees that Israel would not attack a proposed Iraqi pipeline, administration sources said yesterday.
The president's action could come as early as today, the sources said. Reagan is travelling to California today for a Republican fund-raiser and will go to Mexico Saturday for a meeting with high-ranking Mexican officials at which Meese will be present.
The sources said it was not clear whether an exchange of letters between Meese and Israeli Foreign Minister Shimon Peres also would be declassified. One well-placed source said that correspondence probably also would be declassified, but that the matter remained "up in the air." Another source said there was some resistance to releasing the letters.
It is not clear that declassification of the memo and the letters would result in their being made public, sources said.
The sources said that the Peres letter, read in conjunction with the Wallach memo, could raise questions about both Peres' and Meese's conduct in the pipeline matter. However, the sources declined to provide information about what was in the letter.
Peres has acknowledged receiving a handwritten letter from Meese in which Meese directed him to deal with then-national security adviser Robert C. McFarlane on the pipeline issue. However, Peres has denied reports that he sent a handwritten letter to Meese expressing Israel's support for the project and said the only letter on the matter was a Nov. 20, 1985, letter from Peres to McFarlane informing him that Israel agreed not to object to construction of the pipeline, according to informed sources in Israel.
The sources said an interagency review panel composed of representatives from the White House, Justice Department, State Department, Central Intelligence Agency, National Security Council, and Overseas Private Investment Corp. had unanimously concluded that there was no national security basis on which to keep the Wallach memo classified after news reports about it.
They said there was a concern in the administration that the classification might appear to be a cover-up of possible wrongdoing by Meese, one of Reagan's closest advisers.
However, it is not certain the declassification of the memo and at least one other memo from Wallach to Meese will result in their being made public immediately. Sources said the material will be returned to the Justice Department and independent counsel James C. McKay, who is investigating Meese's role in the proposed pipeline, and that the decision essentially will be up to McKay.
A spokesman for McKay declined comment yesterday. Meese's lawyer, James Rocap, said he had not been informed of the planned declassification and that if the material is declassified, "we'll talk with Mr. McKay about it."
Meese said in a statement last week that he was prohibited from discussing the contents of the Wallach memo because it was classified but that "I do not believe that it fairly implies that a violation of law was committed or contemplated in connection with the pipeline." Sources who have reviewed the memo have described it as "explosive."
Meese has said his involvement in the pipeline project was "entirely lawful, proper and responsible." Peres has denied that anything of value was offered or accepted by him or the Labor Party in connection with the pipeline.
Wallach, Meese's close friend and former lawyer, approached the attorney general about the pipeline in May 1985 and Meese later helped arrange a meeting betwen Wallach and McFarlane on the pipeline, which was never built.
The proposed $1 billion, 540-mile pipeline, to be built by the Bechtel Group Inc., was to run near Israeli territory, from Iraq's Kirkuk oil fields to the Jordanian port of Aqaba. To help with the project, Bechtel brought in Swiss businessman Bruce Rappaport, who has close ties to prominent Israeli figures, and Rappaport in turn brought in Wallach.
Wallach was indicted by a federal grand jury in New York on racketeering, fraud and conspiracy charges in the Wedtech scandal.