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140. Memorandum From W. Howard Wriggins of the National Security Council Staff to the President's Special Assistant (Rostow)/1/ Washington, May 21, 1966. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret. The source text bears a stamped indication that it was seen by Rostow. WWR: McNamara has won the battle over the new $200 million Iran arms sale, so the Rusk-McNamara recommendation (attached)/2/ comes out as close to the hard line as possible. The Shah may scream. So we could face a tactical review of our negotiating line later, though we think it unlikely. /2/The undated memorandum from Rusk and McNamara to the President is not printed. The two main issues were: (1) State argued hard for slices of $100 million in FY 67 followed by $60 million and $40 million tranches. McNamara stood firm on four tranches of $50 million each to spread out the burden on his MAP budget (MAP funds must cover 25% of these credit deals). (2) Meyer pushed hard for 4% interest, but even State eventually agreed that this doesn't make sense. A 4% rate on a $200 million credit would cost $42-48 million more in MAP funds over five years than for the same deal at the market rate (now 5.5%). Hal has fully staffed this out with Budget. Schultze's memo to you (attached)/3/ is fully reflected in the memo to the President he drafted for your signature. /3/Schultze's May 21 memorandum is not printed. Schultze feels very strongly (as we do) that it's essential to keep control of this program in the President's hands. --First, the economics really are disturbing, as Schultze says. Bringing the President down hard on that point will help keep Meyer on his toes (I wasn't too impressed with his grasp of this problem last week). We also want to avoid making this an irrevocable commitment and are underscoring (as Schultze suggests) that this is a planning figure subject to annual review. --Second, we regarded the joint annual economic-military review as a major achievement when the Shah agreed to write it into the 1964 Memo of Understanding. It's an excellent device for keeping our voice alive even after AID phases out, and this year's exercise showed that we really have succeeded in bringing the Shah face to face with his economists. This is why the last paragraph in our memo. The touchy element is timing. Meyer begins the economic review Sunday and should present this package to the Shah as soon after that as possible. However, tactically I assume you feel it's bad to rush the President. So we've only alluded to the timing problem in the memo. We'll rely on you to get it onto his desk quickly and give him a chance to get to it before nudging. Howard
141. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, May 21, 1966, 1:30 p.m. /1/Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 3, May 16-31, 1966. Top Secret. A handwritten note on the margin of the source text reads, "Rec'd 3:20 p." Secretaries Rusk and McNamara recommend you approve $200 million in new arms sales to Iran, which Ambassador Meyer will discuss with the Shah this week. This would extend our 1964 agreement through FY 1970, raising the total arms credit to $400 million. State proposed bunching these sales in the early years but gave in to McNamara's plan for $50 million a year FY 67-FY 70. They finally agreed that our Military Assistance budget is too tight to cover the 4% interest rate Meyer asked for and propose sticking to the market rate (now 5.5%), except for one last sale under the 1964 agreement. Most of us believe the Shah is foolish to spend his money this way. AID forecasts a rapidly growing balance of payments deficit if he pushes both development and heavy arms purchases too hard. His oil revenues will not rise as sharply as he hopes, and AID fears he will end up asking us to bail him out of a foreign exchange bind just when we are phasing out of economic aid. But since he is determined to buy arms somewhere, the best we can do is to lean on the brakes. His parliament appropriated $200 million last fall, and only by sending a survey team have we delayed him this long. We will probably want him to let us set up in Iran a partial alternative to our intelligence facilities in Pakistan (we will re-open this with you soon). Anyway, if we cannot dissuade him, no point in losing a good sale. While on balance this package makes sense, we want to be flexible in case Iran's economy sags. We want Meyer to keep a close eye on the economics and not tie you too firmly to a long-range commitment, thereby losing the leverage of a short leash. So I recommend you approve but authorize me to read back to State this indication of your feelings: "The President is deeply concerned over Iran's worrisome economic prospects. He wants each slice of this new program submitted to him for approval only after searching review of Iran's economic position. He regards the new $200 million as a planning figure subject to annual review. He asks that Ambassador Meyer tell the Shah of this concern, while reassuring him of the President's full respect for his judgment." Charlie Schultze concurs. Attached is a rather legalistic justification./2/ /2/Not printed. Walt Approve/3/ /3/This option is checked on the source text. See me
142. Telegram From the Department of State to the Embassy in Iran/1/ Washington, May 23, 1966, 4:53 p.m. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Immediate; Limdis. Drafted by Crawford; cleared by ISA Regional Director for Near East and South Asia Lieutenant Colonel Fred E. Haynes, Jr., Howison, and Wriggins; and approved by Hare. 1158. For Ambassador. Subject: Annual Review. Refs: Deptel 1155;/2/ Embtel 1572./3/ /2/Dated May 21. (Ibid.) /3/See the attachment to Document 143. 1. President has approved following instructions (which take place of refdeptel) for your audience with Shah in connection with second annual review. You should inform Shah US willing, subject to availability of funds and continued Congressional authorization: a. Provide credit financing for remaining $60 million under 1964 Memorandum of Understanding at 4 percent. b. Provide additional credit sales up to $200 million in annual increments of $50 million through FY'70 at interest averaging between 5 and 6 percent, repayment within ten years from date of agreement. c. Provide credit financing in FY'67 of $50 million (in addition to $60 million remaining under 1964 Memorandum of Understanding). d. Make every effort complete deliveries of items opted for by Shah by end FY'71, but because this involves new procurement we cannot now predict with certitude that this will be possible. FYI. Almost certain some items will spill into FY'72; extent of spill-over will depend on priority GOI assigns to weapons systems and which ones it wants to negotiate first. End FYI. 2. You should also inform Shah orally as follows: It is our view total amount of US credit contemplated for FY'65-'70 period ($400 million) together with $70 million in cash purchases could prove overly heavy burden for Iran's economy. For this reason we continue attach great importance to our joint annual military/economic review which will allow us to form economic conclusions bearing on release of annual tranches. These reviews will necessarily consider, among other things, substantial additional military purchases. FYI. We assume annual review already agreed to would allow for consultations on magnitude and terms of major purchases outside this arrangement and therefore specific amendment of 1964 Memorandum of Understanding to provide for consultations on this not necessary. President considers new $200 million as planning figure, a commitment in principle on condition that our joint economic review confirms feasibility in light Iran's economic position. You should impress concern re economic burden on Shah, in context above, while reassuring him of President's full respect for his judgment. End FYI. Rusk
143. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, May 23, 1966, 6 p.m. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret. A handwritten notation on the source text reads: "OK--L". SUBJECT Attached is a cable from Armin Meyer, objecting to the State-Defense Iranian package. Setting aside rhetoric he has two pleas: 1. Getting Deliveries on Schedule. Because of long delivery lead times, he wants more funds at the beginning and smaller amounts toward the end of the five-year period. DoD insists on equal slices for budgetary reasons, but in reply to his cable has agreed to make a special effort to speed deliveries. 2. Eliminating the Strait Jacket. Because of the Shah's growing sense of confidence and independence, Meyer objects to insisting that the Shah must agree to revising our 1964 Memorandum of Understanding to include consulting with us prior to making purchases of military equipment from third countries. Anticipating this problem, we put a paragraph in our memorandum to you, providing that you would review each tranche of the loan in the light of Iran's economic position. This gave the flexibility required to meet Meyer's point; that is, our commitment is a target figure, subject to regular review; but he doesn't have to ask us every time he wants to buy equipment somewhere else. We have agreed, therefore, to eliminate this part of Meyer's instructions, though we shall tell the Iranians we expect such purchases will be part of the annual military/economic review agreed to by the Shah in 1964 and a regular cooperative exercise since then. Walt Attachment TEXT OF CABLE FROM TEHRAN (1572)/2/ /2/Telegram 1572 from Tehran, May 23, is in Department of State, Central Files, POL 1 U.S. For the President from Ambassador Meyer. Iran and U.S. The problem of U.S. military sales to Iran which I was privileged to discuss with you on May 13 has reached a critical juncture. A package proposal has been formulated by our associates in Washington. It is to be presented to the Shah as soon as your approval has been obtained./3/ /3/Telegram 1155 to Tehran, May 21, transmitted the package proposal. (Ibid., DEF 19-8 U.S.-IRAN) While considerably more restricted than is compatible with protection of our interests, the package proposal reflects careful attention and an effort to be as forthcoming as Washington circumstances and the U.S.'s view as to Iran's capabilities permit. As your Ambassador to this country, I am nonetheless concerned that we are about to alienate the Shah and his country with whom we have had a long and mutually beneficial friendship. My concern is of sufficient depth to warrant taking a few minutes of your valuable time to request relatively small modifications which may be able to reduce adverse repercussions to manageable proportion. My week in Washington made clear the antipathy which exists both in our legislative and executive branches to military programs, particularly following the Indo-Pak debacle last fall. This is fully understandable. But it makes very difficult the maintenance of healthy relationships with true friends like Iran with whom we have a long-standing military relationship. Due to massive Soviet arms shipments to this region, the vulnerability of Iran (like Israel) has sharply increased. The Shah six months ago became so concerned he obtained authorization from his Parliament for an additional $200,000,000 borrowing authority to build up his air and naval defenses. His purpose is to deter aggressive action against Iran's vulnerable oil producing areas or to cope with such aggression if it takes place. Deeply impressed by the Vietnam situation, the Shah believes such self-reliance is in U.S. as well as Iran's interest. A seven-man team of U.S. military experts under Brig. Gen. Peterson assessed the situation in March. In a report (which the Shah has in his possession) Peterson confirmed that a threat truly exists and recommended a rational program for augmentation within the $200,000,000 added ceiling. Thus, the judgment that early measures should be taken is not only the Shah's but our own. A main concern in Washington is the effect of military expenditures on Iran's economic development. At present, Iran is thriving. With his profound sense of mission, the Shah is making Iran a show-case of modernization in this part of the world (8-10 percent growth rate, utilization of 75 percent of the $500,000,000 annual oil income for development purposes, land reform, literacy corps, etc.). The problem is he may bite off more than he can chew. It is the Embassy's view, however, that as in the past, major projects (and their financing) will stretch out over a considerably longer period than planned. While we, of course, regret any diversion of Iran's resources to military expenditures, we are convinced favorable economic factors are such that Iran can meet the financial burdens of a military program along lines envisaged in the Peterson Report without courting disaster. In any case, economic difficulties are more apt to be forestalled if we at this Embassy are enabled (by adequate responsiveness to the Peterson recommendations) to maintain a healthy dialogue with the Shah and his Government. This brings me to my greatest concern with the proposed package. The underlying assumption appears to be that the U.S. Government can compel the Shah to obtain only such equipment as we decide he can have. This is altogether unrealistic in 1966. Time and again over the past few months the Shah has said, privately and publicly, that Iran is its own master. He has made this clear (again in a lengthy talk with us yesterday) specifically as far as arms purchasing is concerned. I do not foresee the possibility of attaining his agreement to a documentary amendment, as presently proposed, requiring him to consult with us "on the magnitude and terms of major purchases outside this arrangement." It is true he will only with greatest reluctance give up the benefits of a package proposal but he will in my view balk at being put in a strait jacket. Even if it proved possible to obtain his concurrence, rancor would be deep and he would inevitably violate this injunction. Then we would be faced with a showdown in our total relationship here. Instead of a "Papa knows best" attitude, excessive manipulation of which is in my view to a considerable extent responsible for anti-Americanism in this part of the world, I believe we would get much further by treating the Shah like an adult. In our 1964 Memorandum of Understanding we already have provisions similar to the one proposed. We can refer to them if necessary. In any case, I feel strongly that in the realm of human affairs one gets farther by reasoning together than by coercion. I will, of course, try my best to sell whatever final package you authorize. It would have been helpful to have a concessional interest rate, particularly to induce a favorable climate for installation of augmented special U.S. intelligence facilities. That apparently is not possible. What should be possible, however, in addition to "favorable prices," which you mentioned to the Shah in your letter of April 11,/4/ are the following two proposals: /4/Document 129. A. On-schedule deliveries. According to the proposed package, the $200,000,000 credit will be phased in $50,000,000 tranches over four years. The problem is that there is usually a two or three-year delay in delivery after credit funds are arranged. It would be important to be able to assure the Shah: 1. While funding is being held at $50,000,000 per annum level because we want to assist Iran in keeping its debt burden manageable, 2. Delivery of equipment will nevertheless hold to the phased five-year schedule set forth in the Peterson military survey report (in effect this means in most cases funding would be delayed until just prior to delivery dates). If such telescoping of leadtimes is not possible, it is recommended as an alternative that the FY 67 new credit tranche be increased to $200,000,000 by advancing the final $50,000,000 tranche (FY 70) to FY 67. B. Elimination of the strait jacket. If we hope to retain our military cooperation with Iran, including discouraging the Shah's purchasing elsewhere, we are more likely to do so (although complete control is unlikely) by informal consultations as we go along, based on provisions which already exist in the 1964 Memorandum, than if we try to coerce him by further documentation in effect requiring him to seek our permission before he can purchase elsewhere. Certainly treating the Shah like an adult is the best long-range policy if we are to continue to play a role in Iran's moving ahead and if we wish to maintain our rather extensive assets here of significant importance to our national security.
144. Memorandum for the Record/1/ Washington, May 23, 1966. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret. Copies were sent to NSC Executive Secretary Bromley K. Smith and Chief of the Bureau of the Budget's International Division James W. Clark. On June [May] 23, 1966 the President approved the $200 million military purchase loan for Iran. He signed it with the proviso that we would communicate orally to the Department of State the following caveat: "The President deeply concerned over Iran's worrisome economic prospects. He wants each slice of this new program submitted to him for approval only after searching review of Iran's economic position. He regards the new $200 million as a planning figure subject to annual review. He asks that Ambassador Meyer tell the Shah of this concern while reassuring him of the President's full respect for his judgment." While the paper was on the President's desk, a telegram addressed to the President came from Ambassador Meyer/2/ expressing his profound misgivings at the package as it had been communicated on a hold basis awaiting the President's signature. /2/See the attachment to Document 143. 1. He was particularly concerned that each year's tranche would be equal to the others, instead of the first one being larger, since the long lead time necessary for certain items would put their delivery well into the 70's. As a result, DoD agreed to pay special attention to the problem of speeding deliveries. 2. He was also deeply concerned that the GOI would be asked to consult with us before it made any military purchases in addition to those made possible by this loan. The instruction sent to him had insisted that he explicitly seek a revision of the 1964 Memorandum of Understanding to include such prior consultations. NSC staff members Wriggins and Saunders revised the language of paragraph three of the instructing telegram so that it read as follows: 3. It is our view total amount of U.S. credit contemplated for FY 65-70 ($400 million) together with $70 million in cash purchases may prove overly heavy burden for Iran's economy. That is why we attach importance to our joint annual military/economic review on which the future release of annual tranches will depend. These reviews will necessarily consider, among other things, substantial additional military purchases. FYI: We assume annual review already agreed to would allow for consultations on magnitude and terms of major purchases outside this arrangement and therefore specific amendment of 1964 Memorandum of Understanding not necessary. The President considers the new $200 million as a planning figure, a commitment in principle on condition that our joint economic review confirms the feasibility of Iran's growing economic commitments. End FYI. This was intended to be consistent with the staff's understanding of the President's intent in regard to our relations with the Shah, to the substance of the economic review without requiring such an explicit denigration of Iranian independence as the original language represented. Rostow informed the President by memo of 23 May (attached)/3/ of our approach, and the President did not object. Therefore, that part of the Rusk-McNamara memo/4/ which says we will deduct from future sales an amount comparable to the value of purchases in third countries should be read in the light of this later exchange (including Tehran 1572 attached)./5/ /3/Document 143. /4/See footnote 2, Document 140. /5/See footnote 2 above. The record should note that the President approved this program via the covering memo from Walt Rostow. He probably did not address specifics in the Rusk-McNamara memo. Therefore, his decision should be understood more in terms of these memos than in terms of every last legalistic detail in the Rusk-McNamara memo. Howard Wriggins/6/ /6/Printed from a copy that bears this typed signature.
145. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, May 24, 1966, 1635Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Confidential; Priority; Limdis. Repeated to CINCSTRIKE/USCINCMEAFSA. 1585. Annual Review. Reference: Deptel 1158./2/ /2/Document 142. 1. Annual review with Shah took place evening 24th. Two-hour discussion went reasonably well. Shah agreed that Jablonsky and SCS sketch out phased program of procurement within credit limitations set forth in reftel. We made clear all Shah's expectations cannot be accommodated, but did not discuss price details. Shah gave his views as to which items should have priority. 2. Bore down heavily on economic burden, as well as complications which would result for US if Shah makes substantial purchases elsewhere. Only outside purchasing Shah seemed seriously interested in is naval package from British. 3. Threshing out detailed program, which will require Shah to make some hard choices, will still be difficult, but believe at least until his return from three state visits situation here is under control. 4. Appreciate expeditiousness which our Washington colleagues accorded this problem. More detailed report tomorrow./3/ /3/Telegram 1594 from Tehran, May 25, transmitted a detailed account of the annual review session on May 24. (Department of State, Central Files, DEF 19-8 U.S.-IRAN) Meyer
146. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, May 27, 1966, 4:30 p.m. /1/Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 5, May 27-June 10, 1966. Top Secret; Sensitive. In November you tentatively approved a recommendation from Rusk, McNamara and Raborn for establishing contingency alternatives for our intelligence facilities in Pakistan. But you felt we ought to hold final decision until after you talked with Ayub. Then we held further until after Tashkent and the Indian visit. Now State, Defense and CIA have reviewed their October recommendations and (with minor updating) feel we should go ahead. They emphasize that this is not a proposal to relocate most of the present activities from Pakistan or to duplicate them. They propose to develop minimum space and install basic equipment so we can diversify some of these activities and be in a position to move them all on short notice with little intelligence loss if need be. To refresh your memory, they recommended we: (a) increase existing [1 line of source text not declassified] (b) add one floor to a planned warehouse in the embassy compound in Tehran; (c) acquire land outside Tehran for eventually developing a more satisfactory permanent installation (including dependent quarters) if needed; and [1 line of source text not declassified]. Costs of (a) and (b) would be about $1.5 million; time about 9 months. Cost of (c) is approximately $5 million with eventual cost depending on how extensively we develop that site; time about 18 months. [3 lines of source text not declassified] As general guidelines, they recommend (a) no further investment in Pakistan; (b) as new facilities come into being, we transfer some of those now in Pakistan to reduce the leverage any one country holds over us; but (c) unless you decide otherwise or the Paks kick us out, we retain a substantial portion of our present Pak activities. They also recommended certain sweeteners for Iran to develop the favorable political climate essential to expansion. Your recent approval of the new military sales package has brought those up to date. The balance of payments impact would be minimal; all equipment would be US-built. One-time real estate and construction costs would be about $6 million, and annual recurring costs about $750,000 (much of which would be offset by reduction of Pak facilities). I believe it makes sense to go ahead with this program now. Since we no longer have the kind of close relationship with Pakistan we had prior to the Chinese attack on India, we would be well to reinsure. If you still approve, I recommend you sign the attached./2/ /2/Attached was a draft National Security Action Memorandum for the Secretaries of State and Defense and the Director of Central Intelligence entitled "Alternatives to US Facilities in Pakistan" that reads: "I have reviewed your 22 October 1965 Memorandum to me in response to NSAM 337 as updated by the Department of State's 17 May 1966 Memorandum to Mr. Rostow and by my approval on 23 May of the new military sales package for Iran. I approve your recommendations as updated subject to the usual review by the Bureau of the Budget before expenditures are authorized." This was issued as NSAM 348 on May 30, 1966. A copy of NSAM 348 is in Department of State, S/S-NSAM Files: Lot 72 D 316. NSAM 337, "U.S. Intelligence Facilities in Pakistan," August 10, 1965, is printed in Foreign Relations, 1964-1968, vol. XXV, Document 168. W.W. Rostow/3/ /3/Printed from a copy that bears this typed signature.
147. Research Memorandum From the Director of the Bureau of Intelligence and Research (Hughes) to Acting Secretary of State Ball/1/ RNA-38 Washington, June 3, 1966. /1/Source: Johnson Library, National Security File, Harold H. Saunders Files, Iran, 4/1/66-12/31/67. Confidential; No Foreign Dissem; Controlled Dissem. SUBJECT The Shah has expressed disappointment with Iran's 1965 crude oil export figures and considers a substantial increase during 1966 necessary to finance his plans for economic development and an expanded defense establishment. This paper explores the background of recent discussions on this subject and its relationship to the Shah's attitude toward the US. Abstract The Shah considers the 1965 increase in crude oil offtake inadequate in view of Iran's financial needs for its economic development and defense. Iranian officials assert that the Organization of Petroleum Exporting Companies (OPEC) authorized a 20 per cent increase in offtake for Iran in 1966 (almost twice the 1965 increase). However, OPEC has not made a public announcement of allotments, and the oil Consortium (which insists that OPEC allotments are not binding on the producing companies) notified the Iranian Government on May 25 that it planned to increase oil liftings by about 9-11 per cent in 1966. Prime Minister Hoveyda has already termed this increase "unsatisfactory" and "unacceptable." The Shah has threatened to go elsewhere for military and economic assistance if the US does not provide what he wants, and Iranian officials have the impression that the Consortium could have promised greater oil offtake had the US applied pressure on the American companies who are members. As a result of the Iranian dissatisfaction, the Shah is likely to become more intransigent in his dealings with the US. However, if the Consortium maintains a unified position on the issue of oil offtake, it is possible that the Shah will be obliged to proceed in a more pragmatic fashion toward a resolution of the conflicting demands of military modernization and economic development on Iran's limited resources. [Here follows the body of the paper.]
148. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, June 29, 1966, 1400Z. /1/Source: Department of State, Central Files, DEF 19-8 U.S.-IRAN. Confidential; Limdis. Repeated to CINCSTRIKE/USCINCMEAFSA. 1762. Military Sales to Iran. 1. Jablonsky and I spent one hour and three-quarters with Shah morning 29th. It was rough. 2. Noting in our meeting previous to his departure we had been able to inform him of USG readiness to provide additional $200,000,000 in credit for military purchases over next five years, I said we had during Shah's absence worked on pricing with view to minimum financial burden. We now had data which we believed could be worked into program acceptable to him. Important point was to get on with job of figuring out third tranche bearing in mind HIM's priorities. 3. Shah said he had every intention being "reasonable." He repeatedly expressed appreciation for what USG has done for Iran in military field in past and his desire that healthiness this relationship will continue. At same time, he referred to predicament in which Pakistan had found itself last fall and since that time due to suspension of US military supplies. He considered USG's policy misguided for in his view US has driven Paks as regards military procurement into arms of Chinese and also Russians, Pak military mission currently being in Moscow. All this, he said, has given him much cause for thought. He has, he said, reached a conclusion as far as Iranian military procurement policy is concerned. If USG shows itself responsive, Shah said he wishes to maintain maximum supply relationship with traditional U.S. supplier. This is particularly true, he said, for lethal and sensitive items such as aircraft. He pointed out that once a pilot is in air he is beyond control and can in fact turn against his country. Hence Shah wants aircraft program in safe American hands. Other items such as anti-aircraft equipment do not present same opportunities for subversive potential. Therefore, if USG unwilling supply such items at reasonable prices and terms, they can be procured elsewhere. 4. Turning to spread sheet of Peterson approved items (except destroyer) and their costs, Shah quickly concentrated on items he wants to order from U.S. without delay: Blue Shark system, remaining 209 M-60 tanks, F-4 aircraft, and 30-day war reserve for three services. Later in discussion, Jablonsky was able to persuade Shah at least for this year to limit additional war reserve to air force only. 5. Shah laid greatest emphasis on F-4 aircraft. He was particularly upset by limitation to one squadron. One squadron, he observed, would only be enough for two or three planes at each airfield. This was totally unacceptable. Also unacceptable, he said, is 1970 target date. Noting how Soviets have already supplied and are continuing to supply MIG-21's to their friends, notably Iraq, Shah said, "We are faced with the problem right now." 6. As to F-4 pricing, Shah considers price of $39 million for 12 aircraft high, although he did not describe it as unacceptable. He said French Mirages have been offered at $1.1 million per copy "naked" and $1.6 million "complete." French have guaranteed to have first Mirage in country in 20 months and total order within 32 months. He noted he could buy at least two Mirages for price of each F-4. At same time, he said, he realized F-4 is much better aircraft. He indicated he would think about this offer for "a week or ten days" (later he said until July 4) but his interest ultimately dependent on obtaining two squadrons and earlier delivery. 7. Question of destroyer never came up during conversation. Shah, however, at one point gave clear indication that he is tending toward British deal (Embtel 1594)./2/ /2/See footnote 3, Document 145. 8. Later in discussion when I urged Shah to keep in mind that his F-5 is good aircraft, which is doing yeoman work in Vietnam, Shah disclosed "in confidence" that an Israeli pilot had been here recently, had flown the F-5, and contrasted it disparagingly with Mirages which Israelis possess. 9. When we noted Shah had not indicated interest in anti-aircraft equipment, Shah said he thought he could get such equipment, as opposed to "sensitive" aircraft, from elsewhere, probably from Russians. He asked re effectiveness of Russian SAM's in Vietnam and Jablonsky reported they only having limited success. Shah noted that until now he has not approached Russians, only British and French. (Implication was that British and French offers not very attractive.) Re Tiger Cat, Shah acknowledged it had only limited value. 10. When I expressed personal hope that Shah could avoid arms procurement from Russians and indicated how it would complicate matters for us, Shah took firm stand. Rest of conversation was heavily punctuated with his insistence that Iran simply must have "liberty of action." He said he hoped USG would understand that his ideals are same as ours and that "even behind our backs he supports U.S. on Vietnam" but Iran's main concern is to "stand on its own feet," from security as well as economic and political standpoints. Instead of acting irritated, USG should realize that Iran's independent stance is best possible roadblock to Communist influence. 11. Shah went on to say that USG has had no compunctions about providing arms to other countries which also procure arms from Soviets. He noted specifically India, Iraq and Yugoslavia. I mentioned those were different circumstances. India was faced with Chinese aggression. Shah retorted India used American arms against Paks. I noted equipment to Iraq was limited and cash sales. Shah said bitterly USG always finds "excuses" for such deals with countries which persistently side against US in world affairs while at same time making life as difficult as possible for US's true friends. 12. Re Pakistan, I noted we apparently assess last fall's episode somewhat differently. I said USG considers it acted in Pakistan's "higher interest" by inducing an early end to conflict instead of fueling war further. Shah retorted tartly all US did was to hurt Pakistan, its ostensible ally, while Indians continued to receive arms from other suppliers. 13. I assured Shah USG welcomes Iran's ability to stand on its own feet, and there is no divergence of opinion in Washington on this score. In fact, most Americans are so gratified they are concerned that Iran's remarkable progress not be jeopardized by excessive expenditures for arms. 14. Expressing full confidence in Shah's ability to keep situation on even keel, I noted clandestine Soviet broadcasts and wondered about wisdom of opening further opportunities for Soviets via arms procurement, non-sensitive or sensitive. Shah was quick to emphasize that broadcasts are aimed at him and his regime. This all more reason, he said, why Iran's best hope lies in "independent" stance which frustrates Communist attempts to drive wedge between Shah and his people. I took occasion also to note that extent of shift in Iranian policy is already misleading some of Iranian opinion, e.g. almost daily attacks in some of lesser Iranian newspapers and a general cooling of atmosphere here against Americans. This too, is Soviet aim, I added. Shah said Russians are paying some newspapers. He added that any unfriendliness of Iranian opinion is at least part due to America's past mistakes. He cited what he considers virtually public USG support for Amini as "last chance for Iran," and alleged USG opposition to Iran's acquisition of steel mill. He said he felt that this trend in public opinion would pass within next few months, just as American press attitude toward his own endeavors has undergone favorable change. 15. Throughout discussion, Shah referred in bitter terms re U.S. policy toward Nasser, and to India. Re latter, he reluctantly agreed that it would be calamity for such sizeable nation to "go down drain." Re Nasser, I reiterated previous argumentation that USG policy is based not on reward for good behavior but on what is in general interest of blocking communism and facilitating Mideast stability. He remained unimpressed. 16. Shah complained how USG treats its friends as "commercial" clients. All my efforts to explain what preferential treatment Iran has received in past and continues to receive failed to change his mind. 17. In summing up, Shah reiterated he wishes to proceed with purchase of: remaining M-60 tanks, Blue Shark, and air force war reserve. He will await further word re F-4's, particularly whether two squadrons available and delivery prospects. Cost factor will also be taken into consideration when comparing offers. He said he would like to make foregoing purchases, but under clear understanding re his "liberty of action" re procurement elsewhere if USG intends to attach "strings." He said he would like to know now so that alternative arrangements can be made now rather than two or three years later when it may be too late. Shah closed by reassurance that whatever happens to our military relationship his ideals are always those of U.S. and free world. Meyer
149. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, July 3, 1966, 1210Z. /1/Source: Department of State, Central Files, DEF 19-8 U.S.-IRAN. Confidential. Repeated to CINCMEAFSA/CINCSTRIKE. 31. 1. Having conveyed indication to Shah re unfeasibility of pre-July 4 response to our conversation 29th (Embtel 28),/2/ FonMin Aram called me in evening 2nd. He had sheaf of notes substance of which emanated from Shah. /2/Dated July 2. (Ibid.) 2. Main theme was that Shah wanted USG continue supply "sensitive" equipment like aircraft. As for non-sensitive material USG should show no concern if such items purchased from Soviets. Aram indicated there was possibility Shah had already approached Russians, i.e. in his talk with Semyon Skachkov, Chairman of Soviet State Committee for External Economic Relations, who was in Tehran this past week signing formal steel mill agreements. In any case, according to Shah via Aram, Americans should not react except cheerfully. 3. Expressing concern, I told Aram Shah should realize Americans are human also. There no question in my mind there will be American reaction if Shah initiates any kind of military procurement from Soviets. Americans will be particularly hurt because Americans have considered Shah tried and true ally and friend. 4. Aram contended USG has not been sufficiently forthcoming. "For seven months" (since passage of additional $200,000,000 credit authorization by Parliament) Shah has waited, Aram said, but only result is USG insists on treating Iran no better than ordinary commercial client. 5. Noting I was getting tired of this line, I said it is grossly unfair. Over years US MAP assistance has been tremendous. Aram agreed, saying Shah deeply appreciative. Despite what was presumably close military relationship, I said, Shah sprang $200,000,000 credit gambit in Parliament without any hint to us. We read about it in newspapers. I could assure Aram effect in Washington was not good. Nevertheless, at Shah's prodding, USG had agreed provide additional credit. 6. It seems incredible to me, I said, that Shah fails appreciate extent of USG military assistance still under way. We had only two years ago agreed provide $200,000,000 credit for military purchases, of which $60,000,000 still available at 4 percent. Recently USG agreed to additional $200,000,000 at between 5 percent and 6 percent. Meanwhile, tens of millions of dollars worth of grant material (including five squadrons of F-5 aircraft) still undelivered, and tens of millions of dollars are programmed as grant component for our supposed joint program in years ahead. I said I could not comprehend Shah's jeopardizing all these millions for a few dollars of ephemeral savings and a 2-1/2 percent interest rate. 7. Aram asked if I have explained all this to Shah. I said these points been conveyed to Shah time and again but he not in listening mood. Furthermore, when one gets explicit, Shah immediately gets offended, makes accusation we threatening him, and is propelled in opposite direction. 8. I went on to speculate that there is something more in all this than meets the eye. (Comment. My hunch, not indicated to Aram, is Shah wants to announce his abortive talks with consortium moguls next week that as he warned his Western friends Iran is shifting its trade pattern, including arms, to Eastern Bloc. This would turn defeat of consortium summitry exercise into cheap political victory.) Aram insisted Shah is honest and guileless friend of US with no ulterior motives. 9. Aram re-emphasized Shah wishes purchase only non-sensitive relatively unimportant military wares from Soviets. I alluded to incomprehensibility of Shah's hastiness. I said I convinced adequate staff work not been done re purchases Shah proposing to make. In our talk 29th, I noted, he completely disinterested in PGM's Hawk Missiles, etc. They best equipment available but apparently for political or other reasons, Shah eager to purchase elsewhere what may turn out to be junk. With Russians, Shah obviously doesn't even know what he wants to purchase, but is "hell-bent" to purchase something probably for political reasons and also because he like other Iranians is mesmerized by 2-1/2 percent interest rate, totally disregarding other factors such as quality, value, etc. I added Shah's military advisors tend to be sycophants who lack courage to question any whim Shah may have. 10. Another point, I said, is that by introducing Russians into Iranian military establishment Shah is inviting security problems for US. US military survey team some months ago checked Iranian security effectiveness and was able to give tentatively favorable report, thus permitting US to go forward with program for Iran's acquisition of Hawks. Now Shah wants F-4 aircraft, one of most sophisticated pieces of equipment. It would not be surprising to me if USG would find it impossible to supply such equipment if Russians in any way involved in Iranian military establishment. 11. Another refrain we been hearing so frequently, I said, is that Iran is "independent" and will tolerate no "strings." (Aram had earlier said Shah tends to feel USG treats him like "lackey.") I noted how delighted U.S. is that Iran is standing on its own feet but added US is also independent. Just as Shah is free to purchase from wheresoever he wishes, including Soviets, U.S. is also free to determine when, how or where it will sell equipment, or even extend grant aid. Question is not one, therefore, of strings. I added that Shah had demonstrated his "independence" in steel mill deal and visits to East Bloc countries. There appeared no urgent need to do so in something as risky as military field. 12. Aram again urged that I have another go at Shah. Reiterating Shah's quickness to take offense, I said he would probably as he did 29th try to back us into corner to state categorically whether F-5's will or will not be forthcoming if he turns to Soviets. I assured Aram that while some sort of reaction is sure neither I, nor President Johnson himself, could in advance state precisely what nature of extent of American reaction will be. Such things as security factors, Congressional reaction, as well as Executive Branch determinations would all play a role. 13. Somewhat taken aback by this blunt talk, Aram said both he and I as diplomats would have to buckle down to confine damage if Shah turns to Russians. I said that was both our jobs. Nevertheless, even aside from direct repercussions on USG military supply program in Iran, by opening door to Soviets in military field Shah in every way stands to lose much more than he can gain. I noted in this connection troubles Pak President Ayub is having in putting lid back on Pandora's box. 14. In closing I urged Aram to seek to curb precipitate action by Shah so as to permit productive US-Iranian dialogue to continue on matters of such vital consequence to this country. I said I ready talk again with Shah or Aram any time they felt it would be useful. 15. At his request ex-PriMin Alam and I discussed arms procurement situation morning 3rd. Covered most of same points covered with Aram but more in context of providing Alam with ammunition in his intimate discussions with Shah. Although considerably more worried than heretofore, Alam retains hope Shah can be dissuaded from involvement with Soviets in military matters. Meyer [Continue with the next documents] |
