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130. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, April 12, 1966, 1355Z. /1/Source: Department of State, Central Files, POL IRAN-US. Secret; Limdis. 1370. President's Message re Iran-US Military Cooperation. Re Deptel 1002./2/ /2/Telegram 1002 to Tehran, April 11, transmitted the President's message (Document 129) to the Embassy for delivery to the Shah. (Department of State, Central Files, POL IRAN-U.S.) 1. Handed President's message to Shah during audience 12th. After reading it intensively, Shah agreed with me that it reflects healthy progress. He asked me to convey his gratification to President. He thought for time being no further correspondence required since matter appears to be on rails. 2. Shah noted, it has been five months since he received emergency authorization from Parliament for $200,000,000 augmentation. He said although there is certain amount of urgency he will defer purchasing little while longer but he hopes USG can expedite matters so that survey report and economic review can be completed prior to his departure May 27 for three state visits. I said my impression is Washington desirous cooperating provided Iranian economic data is promptly provided. 3. Shah said economic data being expedited. He wanted to make clear however, as he had in his most recent letter to President, that Iran's future earnings must be taken into account when determining security program which Iran can afford. 4. Shah added that while he supposed President not in position to do so, it would be helpful if USG authorities could as occasion permits impress on oil consortium members point he has been trying to make that it is in interest of oil industry and free world generally to assure that Iran has adequate income to support appropriate security program as well as Iran's highly successful economic development (as over against furnishing vast sums of money to tiny sheikhdoms who are not as dependable nor influential as Iran in preservation of stability of Gulf region in interests of free world). 5. Shah gratified that in first two months of 1965 consortium offtakes were up over 20 per cent that of year ago but noted in March they only 13 per cent. Average is 17 per cent. He anxious that at least 17 per cent be sustained as year's average. Comment. We will continue to press Iranians for economic projections. Central Bank Governor Samii indicates they are prepared and before PriMin for consideration. At same time, we hope Washington can cooperate in processing of Peterson Report with view to May 21 as target date for annual review. Our comments on latter forthcoming next day or two. Meyer
131. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, April 18, 1966, 0745Z. /1/Source: Department of State, Central Files, POL IRAN-US. Confidential. Repeated to Ankara, Karachi, London, and CINCSTRIKE/CINCMEAFSA. 1397. Hare Talks with Shah and PriMin. 1. In wide-ranging 1-1/2 hour talk 17th with Asst Sec Hare, Shah rehearsed well-known themes. They included: unpredictability of Iraq and readiness of Arabs to serve as Commie tools require Iran's being able cope with regional military threats; even if available, foreign intervention as by friendly U.S. not desirable except of course in event of Soviet aggression which unlikely; Soviet objectives remain unchanged, i.e., penetration of Mideast leap-frogging Iran; specific Soviet objective which is clear from regular Moscow broadcasts is interdiction of West's oil supply from Mideast; Soviet arms are continuing to pour into UAR, Iraq and Syria; Soviet penetration of UAR and Red Sea area already well advanced; Iran must protect its wealth-bearing Khuzistan area; disarmament is ideal but only possible if Arab military establishments controlled; Shah hopes to continue receive his military equipment from US and hopes USG won't let this issue turn into another "steel mill business" and in general Shah urged U.S. (and oil consortium) should support Iran's "command position" in Gulf and Mideast areas. 2. Asst Sec Hare conveyed Secretary Rusk's greetings (which Shah reciprocated); volunteered some observations of Iraqi scene as he had just observed it; complimented Shah on success to date of his various reform programs including literacy corps; discounted Shah's alarmest assessment of Soviet penetration of Arab world but said we maintaining alert observation of situation; assured Shah USG giving expeditious attention to its part of current military-economic deliberations; and stressed that economic development and adequate security must go hand in hand. 3. Of particular interest were Shah's views re CENTO. While acknowledging CENTO's value in economic and communications matters, Shah felt it had not met expectations as military organization, e.g. no command structure, etc. Its collapse, however, would be victory for CENTO's critics. Shah said alternatives for replacing CENTO should be carefully studied. As for himself, he would like to see grouping of Afghanistan, Pakistan and Iran, with Iran because of its wealth and effective leadership playing key role. Form of this grouping not clear and Shah has not broached subject to Paks or Afghans. It doubtful if Turkey could be included because of its NATO affiliation. Nevertheless, Shah been giving some thought to revivification of Saababad Pact. He frankly admitted there no ready-made alternative to CENTO but all alternatives should be seriously studied. Asst Sec Hare agreed future of CENTO de-serves thorough study but at same time pointed out CENTO has had and continues to have significant value. Shah indicated Iran does not intend to cause any controversy at forthcoming CENTO Ministerial conference since he believes intimate discussions more feasible and useful. 4. Later in lengthy dinner discussion, PriMin Hoveyda emphasized Iran's need to continue its remarkable economic progress. He said economic projections for our Annual Review before him for consideration and they will show Iran's determination to maintain 8 percent growth rate. He made usual plea for American investments and USG influence on oil consortium for increased offtakes from Iran (noting that French are taking active interest in financing Iran-Soviet pipeline and in securing new oil concession in Iran). At same time PriMin echoed Shah's views re essentiality adequate military establishment, Asst Sec Hare pointed out it was not simply matter of determining military needs but for USG it was practical problem of what USG can do, pursuant to Congressional authorization, to meet those needs. 5. On departure Shah asked that his best wishes be conveyed to President Johnson and Secretary Rusk. Comment. While not much new emerged from these conversations they were very useful in allowing Iran's two top leaders to present their case first-hand to a top USG official. Shah had obviously given his presentation forethought for it did not require more than a few minutes for him to swing into an appeal for USG forthcomingness in current discussions re Iran's military needs. Once he had delivered his preordained words, Shah loosened up and latter part of discussion, particularly re CENTO, was natural and mutually responsive. PriMin Hoveyda, as usual, was informal and friendly throughout, pleading his case from depth of a heart thoroughly dedicated to economic progress of his country. All in all visit was successful as timely manifestation that USG continued to value Iran's friendship. Meyer
132. Memorandum of Conversation/1/ Ankara, April 19, 1966, 7:05 p.m. /1/Source: Department of State, Central Files, POL IRAN-US. Secret. Drafted by Robert E. Patricelli on April 21 and approved in S on May 3. The source text is labeled "Part VI of VIII." The meeting took place at the Ambassador's residence. Secretary of State Rusk was in Ankara heading the U.S. observer delegation to the 14th Ministerial Council session of the Central Treaty Organization. Briefing material and other memoranda of conversations from Rusk's trip are ibid., S/S Conference Files: Lot 67 D 305. PARTICIPANTS United States Iran SUBJECT The Foreign Minister, noting that he was speaking at the Shah's request, raised the question of "the purchase of arms, which was very dear to His Majesty's heart." He referred to the recent exchange of correspondence between President Johnson and the Shah, and said that His Majesty had been very pleased with the last reply from the President. He stated that the Shah was waiting anxiously to see what General Peterson's report on Iranian arms requirements would conclude. His Majesty felt that Iran was a stable country in the midst of a number of less stable nations, and that it was to the advantage of Iran's friends that she remain stable. She had to be strong, therefore, but in fact she was weak in the Persian Gulf and her air force was inferior to Iraq's. Thus, His Majesty wants very much to purchase arms from the U.S. on favorable terms, but if the terms were unfavorable Iran would have to look elsewhere. The Foreign Minister hoped that the U.S. would not take offense at this kind of statement, for Iran remained a staunch friend of the U.S. Rather it was a matter of the independence of the country and of her stability. The Secretary said we understood and would examine carefully the Shah's proposals in a helpful spirit. The Secretary said that we did not take offense. His Majesty is responsible for Iran and we are responsible for the U.S. And we are two strong, independent, self-respecting peoples. The Foreign Minister stated that he would like to have something to carry back to the Shah about the possibility of purchase of arms in the U.S., and the Secretary asked Assistant Secretary Hare to cable Washington to determine the status of the Military Mission's report. We will try to have something soon for the Foreign Minister. The Secretary observed that His Majesty was a remarkable man, always looking ahead and anxious to achieve great performance. If the Shah reflected back ten or fifteen years, he might well conclude that Iran had never been more secure or economically sound and might feel reassured at her success, for which he himself had been largely responsible. We understood his nervousness about Baghdad and Egypt, but those were minor league threats compared to the Soviet threat which had been much more serious.
133. Telegram From the Department of State to the Embassy in Iran/1/ Washington, May 3, 1966, 4:21 p.m. /1/Source: Department of State, Central Files, DEF 12-5 IRAN. Secret; Immediate; Limdis. Drafted by Hoopes; cleared by Director of the AID Office of Greece-Turkey-Iran-Cyprus-CENTO Affairs John H Funari, Deputy Assistant Administrator for Programs in AID's Office of Program Coordination Gordon Chase, Warren, and Bracken; and approved by Davies. Also sent to ARMISH MAAG, IRAN and repeated to CINCSTRIKE. 1094. Joint State-Defense message. Embtel 1481./2/ /2/Dated May 3. (Ibid.) 1. Sanitized version Peterson Report/3/pouched to you by separate means for delivery to General Aryana and Shah. Total package recommended by report is estimated to cost approximately $308 million. While it is possible that cost may be reduced by such factors as greater equipment austerity, lower usage rates, lower maintenance requirements, reduced volume of supporting equipment, greater in-country maintenance and overhaul, and later delivery dates, these factors have already been partially applied to original cost-out which was substantially higher than $308 million. Therefore major further reductions may be difficult to achieve. /3/A copy of the Report of the U.S. Military Survey Team to Iran, March 22, is in the Johnson Library, National Security File, Robert W. Komer Files, Iran--Report of U.S. Military Survey Team (Peterson Report), February 16-March 3, 1966. 2. An additional factor is requirement for about $80 million to fund remaining items in Annex B to 1964 Memorandum of Understanding (Hawk battalion, M-60 tanks, and electronics gear) as against a remaining $60 million of uncommitted credit. Therefore to fund both these agreed items and total Peterson package would require new credit of about $328 million. This in turn would require raising Iranian credit ceiling from present $200 million to $528 million. 3. State, AID and Defense agree that Iran's total credit should be held within a $400 million ceiling, given Iran's foreign exchange position, estimated future revenues, and economic development needs. Also, MAP funds required to guarantee loans by other institutions are expected to be relatively stringent. Therefore, even if Team report is considered to reflect legitimate military requirements, it will be necessary inform Shah that credit limitations will force a deferment of substantial elements of package beyond 1971. We concur in proposed priority items for deferments as set forth in sanitized version of report, but would expect give Shah wide discretion in determining mix of US-approved items. They would reduce new credit requirement by about $144 million or down to approximately $184 million. When added to present credit of $200 million, this would hold total credit within desired $400 million ceiling. At same time, we believe these particular deferments would not adversely affect planned improvement of Iran's air defense and naval capability which we understand is Shah's primary concern. 4. While firm USG position not yet established, it probable that all items recommended in Peterson Report will be approved for sale except US destroyer. DOD likely take negative position on either US reserve fleet DD or new construction DD. In that event, there would probably be no USG objection if Shah wished turn to UK for destroyer type vessel (either new or used), but USG would have to be satisfied that aggregate of US and UK purchases were sustainable by Iranian economy. 5. Economic review now underway here should shed additional light on capability of Iranian economy. We are certain however that USG will be unable to support an add-on package exceeding $150-$200 million over next five years. 6. In handing Shah Peterson Report it important you make clear that it does not now represent USG position, that its proposals appear to involve in aggregate a cost which exceeds feasible credit limits, and that deferment of some items beyond 1971 is unavoidable and subject review at that time. Suggest you do not raise matter of a probable negative US position on destroyer sale, and give noncommittal answer if pressed. 7. Firm USG position on all issues will be established in time for annual review on May 19. Rusk
134. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, May 4, 1966, 1000Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret. Repeated to CINCSTRIKE/USCINCMEAFSA. 1485. Iran Military Purchasing. Ref Deptel 1094./2/ /2/Document 133. 1. Peterson Report handed to Shah morning 4th. Meanwhile General Jablonsky has made it available to General Aryana. 2. Without discussing report itself, I conveyed to Shah key points of reftel. I pointed out augmentation recommended by Peterson estimated total $308 million, although there some possibility shaving few dollars here and there via routes suggested in reftel. Shah said while Iran might not require equipment of too much sophistication, as far as spare parts, training and usage concerned he could not treat his military personnel with less care than US treats its military personnel. 3. Pointing out USG desires maintain total ceiling of $400 million ($200 million envisaged in 1964 Memo of Understanding plus $200 million authorized last fall by Iran Parliament), I noted that some items would have to be deferred but Shah would have discretion in determining mix of US-approved items. Shah said he has no intention of spending dollar more than is necessary, but he cannot "play with fate" of his country. Once again he called attention to billions of dollars of wealth in southern Iran and said it would be foolish to risk its loss for few million dollars. He considers these expenditures as "insurance." In this connection, he said "recent developments" (Nasser's threats against territory of Saudi Arabia) prove that his concern is not idle and that possibility cannot be ruled out that Nasser's influence will reach Persian Gulf area. I, as usual, expressed view he is overestimating imminence and nature of such danger. 4. Later in discussion, Shah said he has report that Turks are seeking $2,000 million in new military assistance from US, including 3,000 tanks, I expressed doubt. Comment: In Shah's mind there is obviously contrast re what USG providing Turkey via grant as over against much lesser amount we willing to permit his more opulent country to buy. PriMin yesterday also asked me re Turk aid, noting GOI has received report from its Embassy Washington giving various military aid figures deduced from Congressional reports. 5. Shah concluded conversation by expressing hope USG will realize importance of "solidifyingquot; its relations with those countries who still want close and friendly ties with us. I assured him it remains our desire to have healthy relationship with Iran, noting, however, at same time that America is bearing heavy burdens notably Viet-Nam which sometimes limit what we are able to do elsewhere. 6. Comment: Audience was short one for until Shah has had opportunity to study Peterson Report I saw no purpose in getting into details or going beyond general observations set forth in reftel. Shah agreed we would discuss specifics during annual review exercise following my return from Washington./3/ /3/In telegram 1500 from Tehran, May 6, Meyer reported that the Shah's initial reaction to the Peterson Report centered on two points: 1) queries regarding the price of each item in the proposed program; and 2) the need for expediting and increasing the number of all-weather high performance aircraft. (Department of State, Central Files, DEF 19-8 U.S.-IRAN) Meyer
135. Intelligence Memorandum/1/ No. 0813/66 Washington, May 6, 1966. /1/Source: Central Intelligence Agency, DDO/NE Files: Job 80-00105A, IRAN, Historical File for Chief ME (J.R. Critchfield), Book 1. Secret; No Foreign Dissem/CIA Internal Use Only. Prepared by the Office of Current Intelligence in the Central Intelligence Agency's Directorate of Intelligence. U.S.-IRANIAN RELATIONS 1. U.S.-Iranian relations may reach a critical point this month over the issues of Iranian military purchases and the Iranian drive to increase oil revenues. An annual joint survey of the Iranian economy is under way now, and the report of the U.S. Military Survey Team to Iran (Peterson Report) has been completed and was submitted to the Shah on 4 May. Analysis of these two reports in Washington will determine the extent to which large Iranian military expenditures in the US are economically feasible. In addition, the Oil Consortium will determine this month how much to increase its oil offtake (exports) from Iran. The Shah considers a large increase essential to finance his military and economic programs. 2. The Shah is determined to make major military purchases in the near future to bolster defenses in oil-rich southern Iran and in the Persian Gulf, which he believes are endangered by the ambitions of Egyptian President Nasir. The Iranian parliament in November approved additional military expenditures of up to $200 million. The Shah would prefer to make these purchases in the US, but has made it clear that he will turn elsewhere if this proves too difficult. 3. The U.S. takes the position that these purchases can be approved only in the context of an annual joint review of the Iranian economy. The annual review grows out of a U.S.-Iranian Memo of Understanding in 1964. In essence, the review provides economic information which Washington will analyze to determine whether Iran can afford increased military expenditures and still maintain rapid economic development. The Shah finds such limitations irritating and insulting, particularly in the light of his new "independent" foreign policy. 4. The arms issue is complicated by the completion of the Peterson Report. This report appears to be more in line with the Shah's thinking--it acknowledges the Arab threat to Iranian security and recommends stronger defenses in the southern provinces and the Persian Gulf. The additional recommended armaments would require a credit of $328 million over the $200 million credit extended under the 1964 agreement. 5. However, the State Department has tentatively determined (pending completion of the annual review) that the new credit must not exceed $184 million, thus requiring that the Shah postpone a substantial portion of the arms purchases until after 1971. In addition, the US Embassy in Teheran has expressed its concern over the magnitude of the prices listed in the Peterson Report, and fears that the Shah will be disturbed also. Thus, although all the Shah's wished-for purchases except a prestigious destroyer apparently will be approved in principle, the Shah may well find the delay on some items, and the prices, unacceptable. Completion of the annual review probably will not substantially alter the US position. It is quite conceivable that the Shah will use the Peterson Report to counter State Department arguments against immediate heavy expenditures. 6. The oil issue is locked in closely with the foregoing. Members of the Oil Consortium may reach a decision this month on the rate at which they will increase oil offtake. As of late April, the member companies were thinking in terms of a 10.5-percent, or at most 12-percent, increase over 1965 production. The Shah insists, however, that the rate must be at least 17 percent if Iran is to carry out its economic and military programs without "reorienting" its trade pattern. Both the US and British companies in the consortium argue that they are producing as fast as possible, and each group accuses the other of holding back production. A final meeting was scheduled for 10 May, but apparently has been temporarily postponed because the Shah has invited some company heads to Teheran for discussions later in May. The US fears the consequences of a major confrontation between Iran and the consortium, and has been encouraging US companies to raise their production as much as possible. 7. The Shah, bolstered by his rapprochement with the Soviets and by political stability and economic growth at home, has exhibited an increasingly independent spirit in the past year. He is determined to obtain new military equipment soon, and there is little doubt that he will turn elsewhere if the U.S. does not sell quickly and on favorable terms. He has felt for some time that the US takes Iranian friendship for granted, and he regards the arms question as a crucial test of US support and sincerity. He is equally determined to increase oil revenues, and may well be serious in his threat to shift at least part of Iran's trade to the East, where export prices are lower and terms are easier. This could, in turn, put a brake on the growing US private investment in Iran, as well as affect our general politico-military relationship with the country.
136. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, May 12, 1966, 11 a.m. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret. A notation in the President's handwriting on the source text reads: "Put on my desk--L." Ambassador Meyer asked to see you tomorrow/2/chiefly to get your personal greetings for the Shah. However, he is here to work out our position on a new $200 million arms sales package, which he will be discussing with the Iranians next week at our annual joint economic-military review. You will get a formal recommendation shortly. AID feels the Shah should not spend his money on arms because the purchase could strain his resources to the point of requiring renewed U.S. budget support. State believes the Shah is determined to buy--he has told you so in his last two letters--so our best bet is to try to control his buying by selling ourselves. So you may want to hear Meyer's views firsthand. /2/On May 5 Rostow sent the President a memorandum suggesting that he meet with Ambassador Meyer while he was in Washington in order to get his first-hand analysis regarding the new military credit sales package for Iran, which was going to be the biggest issue in U.S.-Iranian relations that year. The President agreed. (Ibid.) Suggested talking points: 1. Meyer should carry your personal greetings to the Shah. You especially hope the new Prince is doing well. 2. He should express your appreciation for the Iranian medical team in Vietnam. 3. He should also give the Shah a private message from you: You are concerned about reports that the Shah feels we are trying to run Iran for him. You want to assure the Shah of your fullest respect for him as a leader. When you express your views, you are not advising him. But you are deeply interested in the progress of his economic revolution and often want to share your thoughts, as only friends can. 4. You are worried to hear that new arms sales will create a serious debt burden. You are interested in Meyer's views. 5. You count on Meyer to make serious business of the annual economic military review. (He feels it has already accomplished its purpose by forcing the Iranians to face up to shortage of resources and to set priorities. But we ought to continue to press them on economic issues in next week's talks rather than just negotiating the arms package.) 6. Meyer should understand that if these arms purchases cause a financial crisis, it will be very difficult for us to justify bailing Iran out. You count on Meyer personally to make sure the Iranians fully understand the economic consequences of these purchases and to raise the red flag at the first danger signal./3/ /3/Johnson held an off-the-record meeting with Ambassador Meyer and NSC staff member Howard Wriggins on May 13 from 1 to 1:28 p.m. The President's Daily Diary notes that the discussion centered on the hopeful changes in Iran in the past 2 years as well as the problems associated with the Shah's desire for large military imports. (Ibid.) Walt
137. Memorandum for the Record/1/ Washington, May 12, 1966, 2:30 p.m. /1/Source: Central Intelligence Agency, DCI Executive Registry Files: Job 80-R01580R, IRG. Secret. Drafted on May 13 by Chief of the Near East and South Asia Division in the Directorate of Operations James H. Critchfield. SUBJECT /2/The Interdepartmental Regional Group for the Near East and South Asia (IRG/NEA) consisted of members from the Departments of State and Defense, the Central Intelligence Agency, the Joint Chiefs of Staff, the Agency for International Development, the U.S. Information Agency, and the White House. 1. The general subject was U.S. relations with Iran; the specific problem was the proposal to respond to the Shah's request to buy additional arms from American manufacturers with favorable credit terms underwritten by Defense. 2. Background: a. In 1964 negotiation, USG agreed provide $200 million arms aid, 10 years @ 4% terms. Currently under negotiation are final arrangements of third tranche of this 1964 package. b. Several months ago the Iran Parliament authorized the Iran Government to expend an additional $200 million on foreign arms procurement. c. 1964 agreement included provision that USG would annually review the viability of Iran economic development to ensure defense spending did not undermine economy. d. In February 1966, General Peterson of STRICOM visited Iran and reviewed (1) the character of the military threat to Iran and (2) a proposed arms package that would meet this threat. e. When costed out, General Peterson's package adds up to well over $300 million, i.e. more than $100 million more than Iran Parliament provided. f. General Peterson's report for the first time included USG recognition of the threat to Iran as the result of massive Soviet involvement with and support of a variety of revolutionary elements in the Middle East. (Footnote: This estimate was written in Tampa and included in a document signed by U.S. and Iran military prior to consultation with either the Ambassador or the intelligence community. After expressing some irritation, Ambassador Meyer and the State Department elected to live with this fait accompli. Indeed, Ambassador Meyer is now exploiting it.) g. The CIA member of the IRG/NEA transmitted a proposal to Ambassador Hare on 22 March 1966 proposing an early IRG consideration of the dangers apparent in the present state of our relations with the Shah. Ambassador Hare responded by calling to the attention of the CIA representative NIE 34-66/3/ on Iran (basically reassuring), but agreed to put Iran on the IRG agenda at an early date. /3/Document 125. h. During late April and early May, Ambassador Hare visited the Middle East, including Iran./4/ /4/For a report on Hare's meeting with the Shah on April 17, see Document 131. i. NIE 34-66 approved by USIB on 24 March 1966 concluded: (1) that the Shah was unlikely to move deliberately to alter the alliance or reduce U.S. activities in Iran. (2) that Iran's rate of economic growth could be adversely affected by the Shah's ambitious military expansion program. j. An OCI Memorandum (CIA Internal Use Only) dated 6 May 1966/5/ observed that: /5/Document 135. (1) U.S.-Iranian relations may reach a critical point this month over the issues of Iranian military purchases and the Iranian drive to increase oil revenues. (2) the Shah would prefer to make military purchases in the U.S. but has made it clear he will turn elsewhere if this proves too difficult. (3) the Shah found the insistence on the part of the USG that any agreement to provide additional military purchases be related to the annual review "irritating and insulting, particularly in light of his new 'independent' foreign policy". 3. IRG Discussions: a. Ambassador Hare provided a lucid analysis of the long history of USG involvement in the internal affairs of our military and aid clients, concluding with the observation that we are in a new phase; we have seen the end of the "client relationship". The close relationship must be modified, he said; it will be different but it will not disappear. His assessment of the Shah's attitude coincided with that which has been reported [less than 1 line of source text not declassified] by Ambassador Meyer. b. Mr. Hoopes (ISA/Defense) reviewed the status of the old 1964 agreement (third tranche of $60 million under negotiation of credit terms) and summarized the history of the new proposal. Regardless of Defense agreement with the Peterson Report, limitations on MAP resources would, he thought, limit a new package to approximately $180 million); the 10-year and 4% credit would be difficult to arrange but Defense would attempt it. Hoopes thought this package would, with luck, barely meet the Shah's requirement; Ambassador Meyer agreed. c. AID was entirely negative, deprecated the threat to Iran (rather incompetently), argued for tough handling of the Shah (shades of the 1961 Iran Task Force!) and stuck to the position that the Iran economy could not support the $200 million additional arms purchase. State, fall-ing back on IBRD and IMF judgments, disputed some of the AID premises. Ambassador Meyer also challenged AID. Ambassador Hare acknowledged that the AID position was probably sound but unrealistic and wishful thinking; Ambassador Meyer agreed. d. I said that the Agency supported both the assessment of Ambassador Hare and that of Ambassador Meyer (as I understood them). In describing the Agency position I use the language (but made no reference to) the OCI Memorandum dated 6 May 1966. I acknowledged this reflected an adjustment from the conclusions of the 24 March 1966 NIE. The threat to Iran from the areas of her Near East neighbors had never, I thought, been the subject of an intelligence community estimate; State had, however, occasionally offered judgments, to the Shah, on this subject. I referred to the dangers inherent in the practice of reacting to the exaggerated "estimates" from the Shah and others by calming them with watered-down estimative judgements deprecating the long-term Soviet indirect threat in the Near East. I expressed the opinion that these "bogus estimates" tended to gain currency and validity within the USG and unnecessarily complicated the task of developing a USG consensus for action when it was needed. I noted the need for better intelligence on the changing situation in the Gulf and the Arab Near East. e. Alternatives to USMAP--The question of alternative free world military sources was discussed. Ambassador Meyer categorically opposed any sacrifice of our monopolistic position. ISA/Defense, the White House representative and I all expressed some enthusiasm for a reappraisal of this established USG position. I noted, for example, that the UK alternative to the USG in the field of naval equipment for the Gulf might be positively approached. I also observed that the Shah's representatives had been shopping in German shipyards. f. The Shah's new status--I noted that we had not indicated any real interest in the Shah's offer to assume a greater responsibility in his part of the world in order to reduce the load on the USG. Regardless of the obvious question of his real capability, I thought that the Shah's offer should be viewed as an opportunity which could be exploited. A smaller military package could be made palatable to the Shah if it were wrapped in the trappings of a real gesture from the President recognizing the Shah's offer. ISA/Defense and the White House favored this and recognized it would take some careful thought. Ambassador Hare and Ambassador Meyer listened attentively to this discussion. 4. IRG Action--Ambassador Hare summarized the discussions as reflecting a consensus that we should, within the limits of available resources, react positively to the Shah. He noted that Defense had not yet formulated a precise proposal. 5. Following the meeting, Ambassador Meyer and Mr. Hoopes departed for the Pentagon for a meeting with Secretary of Defense McNamara. I have been reliably but informally advised that the meeting went badly. Secretary McNamara did not appear to be aboard on the otherwise positive Defense position. His reaction was reportedly very discouraging; he emphasized the troubles he was having with Congress on MAP and the great demands elsewhere for our limited resources. 6. Secretary Rusk, advised late 12 May 1966 of Secretary McNamara's negative attitude, reportedly withdrew to a non-committal position. Ambassador Meyer was, however, given a free hand to present his case to the President. 7. Ambassador Meyer saw the President at noon on Friday the 13th. The President, I have been advised by State, listened carefully to a thirty-minute presentation. The President said that he would defer making a decision. Ambassador Meyer has cancelled his reservation to depart for Iran on 14 May. James H. Critchfield/6/ /6/Printed from a copy that indicates Critchfield signed the original.
138. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, May 18, 1966, 1015Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Priority; Exdis. 1550. For Secretary. 1. As you may know, my efforts last week in Washington to assure responsive USG position to Shah's military needs, as confirmed by General Peterson's military survey, unexpectedly met resistance from Secretary McNamara. Despite Peterson findings, he reluctant proceed with additional military sales here. His understandable reasons: a) general Washington antipathy to military programs particularly following Indo-Pak conflict last year: and b) concern that military expenditures will jeopardize Iran's economic development. 2. Even without Peterson confirmation, Shah is convinced Iran needs additional equipment. It not possible to dissuade him from securing adequate air defense for wealth-bearing southern region of Iran and some additional naval craft to assure stability of Gulf as traditional British power diminishes. Economically, Shah tends to bite off more than he can chew but recent history demonstrates projects never progress as rapidly as anticipated and this tends to relieve financial indigestion. In any case at present Iran is thriving and generally justified optimism prevails here re future. 3. There is no doubt Shah means it when he says he will buy elsewhere if USG not forthcoming. British told us last week they undertaking intensive military sales campaign here. French, Italians and others also in wings. Soviets also a possibility that cannot be excluded. Our conviction is that maintenance of US-Iran military relationship is best bet for keeping Shah from going off deep end economically or otherwise. 4. Aram 17th quoted Shah as expressing hope that his five months' wait would be followed by adequate US responsiveness but if not he determined make other arrangements. Shah cited Kosygin's visit to Cairo as compounding concern engendered by Nasser's threats against Saudi Arabia and Nasser's announcement that UAR will continue in Yemen in anticipation of British withdrawal from Aden in 1968. While Shah no doubt sent this word in part to pressure us, Aram is genuinely concerned re Shah's attitude. 5. Turk Ambassador Kent sought me out evening 17th to report that during 1-1/2 hour conversation previous day Shah had at one point stated that if US fails to respond to his additional military needs Kent should "not be surprised to see Malinovsky here." Such talk is, of course, obnoxious and may also have had purpose of influencing our views. At same time, I remember Ambassador Henry Grady telegraphically commenting before breakdown of oil industry here that some people think Iranians will not cut off nose to spite face but those people are wrong. 6. All this does not mean we should jump through hoop when Shah snaps fingers. Peterson Mission reduced Shah's demands to justifiable requirements. Beyond this, equipment recommended by Peterson will exceed in cost $200,000,000 supplementary loan authorization which Shah has received from Parliament. This means that within Peterson program, Shah is going to have to make some choices. In any case, during our discussion of these matters I intend to bear down heavily on need for keeping military expenditures from wrecking economic progress which Iran is making. 7. Military package which we propose should above all honor promise made in President's letter to Shah of April 11,/2/ i.e. credit sales within additional $200,000,000 ceiling at "most favorable prices." It seems every time DOD takes another look at the figures, prices go up further. Hope they can be kept to minimum cost to USG and with waiver of research and development percentage (my impression such waivers not at all uncommon). As to interest rate, we continue to hope that for important political reasons (climate for augmented special facilities) one percentage point can be shaved from 5-1/2 percent going rate for additional $200 million credit. /2/Document 129. 8. In general, our colleagues in DOD appear to want to be as forthcoming as circumstances permit. Ray Hare would know present status of their thinking and whether a word from you might be helpful. If such word needed, I can assure you it is in our nation's interest. Meyer
139. Intelligence Memorandum/1/ No. 1355/66 Washington, May 21, 1966. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret; No Foreign Dissem. Prepared by the Office of Current Intelligence in the Central Intelligence Agency's Directorate of Intelligence. THE ARAB THREAT TO IRAN 1. Iranian foreign and military policies are heavily influenced by the Shah's belief that Arab nationalism, personified by Egyptian President Nasir, is striving to dominate oil-rich and vulnerable south-western Iran and the Persian Gulf area. His concern has been heightened by the diminishing role of the UK in the Persian Gulf shiekdoms. 2. From a geopolitical standpoint, the Shah's fears for the security of southwestern Iran and the Persian Gulf are not groundless. The oil facilities in Khuzistan Province and the offshore islands provide nearly 75 percent of Iran's foreign exchange earnings, and hence are the primary source of Iranian economic development funds. These highly concentrated facilities provide extremely vulnerable targets for sabotage. 3. Iranian transportation routes to the Western world are also vulnerable. The major ocean port, Khorramshahr, can be reached only through the Iraqi-controlled Shatt-al-Arab waters. A hostile Arab sheikdom at the Strait of Hormuz--the mouth of the Persian Gulf--could endanger all Iranian shipping into the Indian Ocean. Iran is attempting to decentralize the oil industry, and to open new ports along the Gulf beyond Iraq's control. The most important new facility will be the port at Bandar Abbas, on the Iranian side of the Strait of Hormuz. This will also be Iran's main naval base. Bandar Abbas is not expected to be completed before 1968, however. 4. Psychological and political factors have led the Shah to believe that Arab nationalism presents a "clear and present danger" to Iranian security. He bitterly resents Nasir's claim to leadership of "progressive forces" in the Middle East against "reactionaries" (including the Shah), especially in view of his ambitious social "revolution" in Iran. The Shah feels that he has been insulted by the UAR's break-off of diplomatic relations in 1960 and by Nasir's subsequent propaganda attacks against his country and himself. He may fear, too, that Nasir's brand of aggressive and neutralist nationalism, and his charisma, will prove infectious to some Iranians. 5. The Shah holds Nasir responsible for claims occasionally voiced by various Arab leaders to Khuzistan ("Arabistan") and for their presumption in terming the Persian Gulf the "Arabian Gulf." The Shah probably is convinced that Egypt, Iraq, and Syria--which the Shah lumps as one malevolent force--are actively plotting to take over Iranian territory, and fears that the nearly 500,000 Arabs living in Khuzistan--a majority of the province's population--could become a "fifth column." 6. Iraq's close relations with Egypt since the coup of November 1963, and the presence of Egyptian troops in Iraq, have convinced the Shah that the Iraqi Government is a tool of Nasir and that the web of Arab nationalism is tightening around Iran. [3 lines of source text not declassified] In addition, actual border incidents between Iranian and Iraqi troops in the course of the Kurdish rebellion have added fuel to the fire in the Shah's mind. There have also been reports of arms shipments from Iraq to dissidents among the Qashqai and Baluchi tribes. The Shah's predilection to believe the worst of Nasir leads him to put all available facts, rumors, intelligence reports, and suspicions into a pattern which proves to him that Nasir is out to overthrow his government. 7. The pattern he sees is an exaggerated version of what Nasir in reality has done and is doing in the way of "threatening" Iranian security. Nasir may well be giving encouragement and some form of covert aid to Arab nationalists conspiring against the Shah. Egypt regularly beams propaganda to Iran--Cairo radio broadcasts in Persian for two hours each day, and a clandestine "Voice of the Iranian Nation" emanates from Egyptian territory for four hours daily. Moreover, Nasir has attacked the Shah directly in recent speeches. Nasir is actively engaged in subversive activity in the Persian Gulf sheikdoms, and his efforts eventually to succeed Britain as the dominant influence among them could be construed with some validity as posing a long-range threat to Iranian transit through the Strait of Hormuz. 8. Other information indicates that the over-all danger Nasir poses for Iran is at most only potential, and indirect at present. [3 lines of source text not declassified] The small 350-man Egyptian force in Iraq, which worries the Shah, is but a token force in the narrowest sense of the term and is designed to influence political developments in Iraq. There are no plans to use it against Iran. The regime of Iraq's late premier Arif, who died in a helicopter crash early this spring, was clearly pro-Nasirist, but did not menace the Shah or his domains. The Arabian majority in Khuzistan is generally inactive politically, [1 line of source text not declassified]. A "Khuzistan Liberation Front," based in Kuwait with an office in Syria, probably receives some support from both Cairo and Baghdad, but does not appear to wield much influence in Khuzistan. 9. In responding to the Arab "threat," the Shah has followed a policy of supporting governments, elements, and activities which might keep his enemies distracted and occupied. The Iranian Government has directed a hostile--sometimes shrill--propaganda campaign against Nasir, both in Iran and abroad. Iran has given military equipment and financial assistance to the Kurdish rebellion, which keeps a large percentage of Iraqi troops tied up in northern Iraq. [3-1/2 lines of source text not declassified] The Iranians have attempted openly to win support among leaders of the Shi'a minority Islamic group in Iraq. Iran has purchased arms for Saudi Arabia to pass on to the Yemeni royalist forces, and has maintained close liaison with Nasir's primary enemy, Israel. Among the more conservatively ruled Arab states, the Shah has attempted particularly to woo Saudi Arabia and Jordan and has given sympathetic attention to Saudi King Faisal's proposal, which Nasir opposes, regarding Islamic solidarity. There is even evidence that the Shah hoped that his rapprochement with the USSR would cause the Soviets to exercise some restraint over Nasir--although Premier Kosygin's recent visit to Egypt may have dashed those faint hopes. 10. The Shah lays most emphasis, however, on bolstering Iranian defenses, particularly naval and air, in the Persian Gulf and southwestern Iran. A considerable defense build-up would be necessary to provide a credible deterrent for hostile Arab countries--which presently have substantial military superiority, at least in an order-of-battle sense--were they in fact bent on attacking Iran. The Shah suspects, moreover, that in the event of an attack, the U.S. might be caught in the middle and might even stop selling arms, as it did to Pakistan during the conflict with India last fall. U.S. economic assistance to Nasir tends to bolster the Shah's conviction that he would have to stand alone against the Arabs. He gives every sign of being determined to add substantially to his country's armaments, whether or not the U.S. Government agrees with his assessment of the Arab threat, and has made it clear that he will go elsewhere if he cannot purchase additional military equipment quickly and on desirable terms from the U.S. (MAP) [Continue with the next documents] |
