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220. Background Paper Prepared in the Department of State/1/ SHAH/BP-1 Washington, August 15, 1967. /1/Source: Johnson Library, National Security File, Country File, Iran, Visit of Shah (con't.), 8/22-24/67. Secret. No drafting information appears on the source text. VISIT OF THE SHAH OF IRAN
U.S. MILITARY ASSISTANCE TO IRAN Summary Our military relationship with Iran is fundamental to our overall relationship, and the Shah will be seeking, during his August visit, a reaffirmation of our desire to continue the close military relationship we have had in the past. Although he is clearly determined to move away from his former complete dependence on us for military assistance, there is no sign that he wishes seriously to disturb the fundamentals of his security relationship with the United States. Despite recent Iranian purchases from the UK and the USSR, the influential position which the U.S. has achieved with the Iranian military establishment will continue as long as we are able to continue our military assistance, sales and related advisory programs. Since the inception of our military assistance to Iran in 1954, we have programmed military equipment and services totaling more than $790 million for Iran's armed forces. We have also conditionally agreed to extend Iran credits up to a total of $400 million for military equipment and services during FY 1965-70. Credit agreements for $300 million have already been signed and the funds earmarked for specific purchases. Our grant military assistance continues on a reduced scale. During his visit, the Shah is likely to express a desire to obtain additional equipment and advisory assistance and to indicate that Iran's security needs will be met by purchases from other sources if the U.S. is unable to respond favorably to his requests for assistance. Discussion U.S. military assistance policy toward Iran has evolved significantly during the past few years. Prior to 1964, all U.S. military equipment and services were provided Iran on a grant basis; since that time, Iran has undertaken to pay for an increasingly large portion of its defense needs, and we anticipate that by 1970 the U.S. grant program in Iran will concentrate on training and support unless overriding political exigencies require grant materiel aid. The impetus for Iran's present military purchase policy was composed of several factors: 1) the fact that U.S. grant military assistance has been provided exclusively to meet the Soviet threat and not that from other directions which the Shah believes to be more imminent; 2) the Shah's conviction that the principal short-term danger to his country lies in Nasserist Arab ambitions in the oil-rich Persian Gulf area (see separate Background Paper);/2/ 3) Iran's growing foreign exchange revenues from oil which now exceed $600 million annually. /2/Not printed. (Ibid.) Increasingly worried over the radical Arab threat, the Shah approached us in early 1964 with a proposal to make large-scale military purchases estimated at more than $450 million. We were concerned that purchases of this magnitude might seriously impair Iran's economic development program. We eventually persuaded the Shah that a credit of $200 million over a 5-year period would meet Iran's needs. A Memorandum of Understanding covering this $200 million credit, and also extending the U.S. grant aid commitment through FY 1969, was signed on July 4, 1964./3/ /3/See Document 47. In November 1965, the Shah pressed us for additional credits. A U.S. military survey team was dispatched to reassess the threat to Iran, and we agreed in August 1966 to amend the earlier Memorandum of Understanding so as to make available an additional $200 million for military purchases over the FY 1967-70 period./4/ The new credit was subject to release in four annual increments of $50 million each, with approval of each increment to be made by the President after a thorough review of Iran's economy to ensure that extension of each credit increment would not impair the economic development of the country. /4/See Document 171. Under the Agreement as amended, Iran is buying two squadrons (32 aircraft) of F-4-D interceptors to complement the six squadrons of F-5 fighters provided under MAP, 460 M-60-Al medium tanks to modernize Iran's armored division, an air control and warning system to protect Iran's oil-rich southwestern region against possible aggression, C-130-E transport aircraft to enhance armed forces mobility and a 60-day war reserve of ammunition. Our long-term agreement and the virtually exclusive military advisory relationship provided through ARMISH-MAAG should ensure our remaining the primary foreign military influence in Iran if we can continue to provide advisory services and credit on an attractive basis for military sales. We are not trying, however, to sustain a position as exclusive supplier of military equipment. Last year, Iran ordered some $60 million worth of short-range missiles and naval craft from Britain, and in February 1967 the Iranian Government announced a $110 million barter agreement with the USSR for the purchase of non-sophisticated military items (see separate Background Paper)./5/ Iran has been negotiating with other European governments for purchases of defense production equipment. /5/Not printed. (Johnson Library, National Security File, Country File, Iran, Visit of Shah (con't.), 8/22-24/67) The Shah recently told Ambassador Meyer that he hopes to place his equipment purchase program on a 4-5 year basis, noting that he was thinking of purchasing Sheridan armored reconnaissance vehicles, transport aircraft, helicopters, a follow-on fighter to the F-5 being provided under MAP and, perhaps, rehabilitated F-4 interceptors late in the planning period. The Shah has not broached the issue of additional credits. In view of the continuing increase in Iran's foreign exchange earnings from oil and Iran's probable equipment modernization needs, however, he may well seek an extension of present credit levels into the 1970's, perhaps coupled with an increase in credit availabilities in FY 1968-70. The Shah has also indicated that he may request more U.S. advisors to assist his Air Force as increasingly complex systems (e.g., F-4D interceptors and an Air Control and Warning System along the Persian Gulf) are introduced. We are not certain as to just what the Shah has in mind, but he may be thinking in terms of U.S. personnel performing actual maintenance on the new materiel. The U.S. Army Mission/Military Assistance Advisory Group (ARMISH/MAAG) has increased its advisory effort with the Iranian Air Force and plans to devote an increasing proportion of its efforts to this area as these systems are introduced. If the Iranians are interested in direct support, they should be encouraged to purchase it from U.S. industry or from U.S. technical advisory groups. The Military Assistance Program is not intended to perform direct support for foreign forces, and a personnel augmentation for this purpose would be extremely difficult, if not impossible, to justify before Congress. Therefore we should urge him to expedite the training of Iranians for such functions and to consider selective purchasing from U.S. sources of personnel services if necessary to complement Iranian efforts.
221. Background Paper Prepared in the Department of State/1/ SHAH/BP-3 Washington, August 15, 1967. /1/Source: Department of State, S/S Files: Lot 68 D 475, Visit of the Shah of Iran, August 22-24, 1967, Vol. I, Briefing Book, V-39-A. Secret. Drafted by Newberry and J. Patrick Mulligan (NEA/IRN) and cleared by Eliot, Rockwell, Funari, and NEA Regional Affairs Director Sidney Sober. VISIT OF THE SHAH OF IRAN
IRAN'S DOMESTIC POLITICAL/ECONOMIC SITUATION Political The internal Iranian political scene has not been as stable as it is today since World War II. The Shah is firmly in control of the government and is in the forefront of the drive to modernize the country. His programs for economic development, land reform, health and education and many other improvements have engaged the cooperation of most Iranians and have outdone the slogans and proposals of the opposition to his rule. Economic growth is creating jobs and investment opportunities and helping to build a middle class with a vested interest in stability. Aside from having the wind taken out of its sails by the Shah's programs, the opposition is divided and impotent. The Shah's regime is still dependent in the final analysis on the security forces which he commands, and the opposition is still strictly controlled. But, except for a few minor incidents, there have been no demonstrations or attempts at armed insurrection against the regime since 1963. The Shah's reform programs and the growing economy are enlisting the energies of numerous former opposition leaders. Parliamentary elections were held on August 4, 1967. Although there were efforts to create an appearance of competition among approved pro-regime candidates, the elections were firmly controlled and directed from the Palace. The new parliament can be expected to be completely responsive to the Shah's guidance. The principal weakness in the Iranian political scene remains its dependence on one man. But the chances for longer term stability, should the Shah suddenly disappear from the scene, are increasing as more Iranians obtain a stake in stability. Although the establishment of democratic institutions as we know them is still a long time off in Iran, the government is relying increasingly on Iran's best trained people as its administrators, and the Shah seeks advice from a broad spectrum of Iranian life. The Shah has also recently decided to establish better procedures for a regency should he die before his 6-year-old son reaches maturity. Finally, even many Iranians who oppose the regime can conceive of no viable alternative. Economic The Shah and his government are proud of Iran's economic and social progress and their economic development plans for the future. The government's annual growth target of 6% for GNP has been well exceeded in the past two years, with relative price stability being maintained in this period. The prospects for the current year again indicate a growth rate of 7-8%. The rate of population growth is estimated to be 3%. Annual per capita GNP is about $230. Oil revenues finance the greater part of the government's development expenditures. The Fourth Plan, which begins in 1968, will establish priorities in favor of industry and agriculture with less emphasis on infrastructure to which considerable resources have already been devoted. Private industrial investment is increasing steadily. Iran's capital investment programs have thus far been carried out with only moderate reliance upon foreign capital. This situation is changing rapidly, however, with official foreign credits as well as foreign private investment steadily increasing. Iran's credit-worthiness has continued to improve, and there appears to be no question that further borrowing on conventional terms will be feasible in the foreseeable future. Annual oil income amounting to over $600 million accounts for approximately three-fourths of Iran's total foreign exchange earnings and about one-half of total government revenues. Although the current outlook indicates there will be continued pressure upon the balance of payments, the long-term foreign exchange prospect is favorable in the light of increasing oil revenues and exports of petrochemicals and natural gas, greater import substitution in manufactured goods, and the government's demonstrated capacity to impose fiscal and import restraints as well as to borrow and usefully absorb greater amounts of foreign capital. Despite increasing urbanization, the importance of its oil resources and the growth of new industries, Iran's economy is still essentially agrarian. The agricultural sector supports two-thirds of the population and provides nearly one-third of gross domestic product and GNP. Land reform has been the cornerstone of the Shah's "White Revolution" and since 1962 the government has made substantial progress in dismantling a feudal land-holding system and extending new ownership and farming rights to villagers throughout the country. This has been accomplished with minimal resistance and without impairing agricultural production. The final phase of land reform now underway is aimed at boosting output and expanding local cooperatives. Further progress will depend heavily upon the ability of the government to mobilize additional capital, extension services and local leadership. This key reform effort has been successfully complemented by an imaginative use of military conscripts serving throughout rural Iran in separate literacy, health and development corps. For example, four years ago only 8% of the rural population received any exposure to rudimentary education. The figure is now 20% and rising.
222. Background Paper Prepared in the Department of State/1/ SHAH/BP-7 Washington, August 15, 1967. /1/Source: Department of State, S/S Files: Lot 68 D 475, Visit of the Shah of Iran, August 22-24, 1967, Vol. I, Briefing Book, V-39-A. Confidential. Drafted by Newberry and cleared by Eliot and Rockwell. VISIT OF THE SHAH OF IRAN
ANTI-SHAH ACTIVITIES IN THE U.S. Students Several hundred of the Iranian students in the United States are ardently and volubly opposed to the Shah. Dissidents, working principally through the Iranian Students Association, have for many years carried on an intermittent campaign of protest against the Shah's regime and have succeeded during previous visits by the Shah in provoking public incidents insulting to the Shah. They have also enlisted American civil liberties groups and "ultra-liberals" in publicizing accounts--some factual and some distorted--of restraints on personal liberty in Iran. These activities have caused continuous irritation in our diplomatic relations with the Shah and his Government. Iranian officials know the limitations on our ability to restrain these anti-Shah activities so long as the Iranian dissidents do not violate U.S. laws. They also know that we have exerted extraordinary efforts to bring to justice or to deport such agitators wherever there is a legal basis for doing so. Fortunately, the number of irritating cases has been on the decline in recent months, but we cannot be sanguine about the prospects for avoiding altogether some organized protest or other efforts to embarrass the Shah during his current visit. Gudarzian Case A spectacular irritant in our relations with the Shah arose out of the activities of an Iranian promoter, Khaibar Gudarzian. "Khaibar Khan," as he calls himself, three years ago published a sensational set of allegations of multi-million-dollar embezzlement including charges against members of the Shah's family and involving AID activities in Iran. The allegations were repudiated by Senator McClellan after detailed inquiry conducted by the Senate Committee on Government Operations. Gudarzian nevertheless succeeded in tying up substantial bank accounts of the Shah's brother and sister for many months until a Federal District Court ruled against Gudarzian last autumn. Gudarzian's appeal to the U.S. Court of Appeals was rejected and his suit against the Prince and Princess has apparently been dropped. The Justice Department has continued to review the possibility of criminal prosecution against Gudarzian. At the present time, however, Justice does not believe that any of the possible charges can be pressed successfully due to a variety of legal technicalities. The Department of Justice is continuing, however, to evaluate the case and will take action if it appears that an opportunity is presented. Our immigration authorities have confirmed that Gudarzian is "out of status" and they have initiated proceedings designed to effect his deportation. This can be a lengthy process, taking a year or more, but the matter will be pressed as rapidly as administratively feasible.
223. Memorandum From Director of Central Intelligence Helms to President Johnson/1/ Washington, August 17, 1967. /1/Source: Central Intelligence Agency, DCI (Helms) Files: Job 80-B01285A, Chrons, Aug.-Dec. 1967. Secret. 1. [5 lines of source text not declassified] We thought the Shah's mood as reflected in the most recent conversation would be of interest to you in light of his visit with you here next week. 2. I have not sent copies of this cable to anyone other than you [1-1/2 lines of source text not declassified]. Richard Helms/2/ /2/Printed from a copy that bears this typed signature. Attachment There follows the text of a cable [less than 1 line of source text not declassified] covering [less than 1 line of source text not declassified] meeting with the Shah of Iran on 15 August 1967: 1. Aside from the perennial subject of demonstrations by Iranian students in U.S., etc., the 15 August meeting with the Shah was standard friendly affair and something of a rehearsal for upcoming visit to the United States. He obviously looking forward to meeting with the President for whom he expressed sympathy and understanding re heavy burden he carries as U.S. top government executive. This after stating he fully understood legislative opportunism and possible irresponsible public performance. Noted however that Export/Import Bank action turned out favorably. In regard to arms he claims to be relaxed, stating he will make his case and if U.S. Government is interested, as they should be, so much the better; if not, he will make other arrangements. No hard feelings--recriminations, etc. He hopeful that at least Air Force support will be forthcoming and that sufficient Air advisors will be available, preferably out of uniform. 2. The Shah was very much concerned over President Ayub's position and Chinese Communist infiltration of Pak forces. States Ayub is old friend but [less than 1 line of source text not declassified] unfortunately has allowed himself to become isolated from realities. He was pleased to note however that Ayub was most responsive to reasoning set forth last regional cooperation for development meeting at Ramsar (resort on Caspian Sea) and in fact indicated appreciation for guidance and "leadership" offered him. 3. King Hussein due Tehran 16 August and the Shah anxious to see him. "A nice chap in an unfortunate position somewhat due to his impetuous nature." The Shah is hopeful he can help King Hussein vis-a-vis the Israelis but essentially finds latter characteristically arrogant, an attitude he feels will be harmful to them in the long run. 4. Aref and Iraq the Shah described as unpredictable and unfortunately not even clever. He had hoped they would see the advantage of cooperation with Iran but this seems beyond their imagination or intelligence. 5. Subject of covert support to Yemen [less than 1 line of source text not declassified] touched on lightly. Message being if you fellows want to be in on the act out here get with it, if not, just say so. 6. In summary, we found the Shah relaxed, confident, pleased with his economic successes at home (which he should be) and looking forward to his visit. His story will be that he is offering the cooperation of the only responsible modern progressive country in the area. While he not working against CENTO, which he views as ineffective, but not bad, the regional cooperation for development is more the answer to regional requirements. While most friendly and bland about all of this, we nevertheless estimate that if visit with the President not productive, he will undoubtedly come away with a less friendly attitude than he now professes. What the Shah really wants from the United States Government is recognition as a responsible area leader and, of course, that undefined material something that goes with this recognition.
224. Intelligence Memorandum/1/ Washington, August 18, 1967. /1/Source: Johnson Library, National Security File, Country File, Iran, Visit of the Shah of Iran, 8/22-24/67. Secret; No Foreign Dissem. Prepared by the Office of Current Intelligence and coordinated with the Office of Economic Research, the Office of National Estimates, and the Clandestine Services, all of the CIA. THE SHAH OF IRAN AND HIS POLICIES IN THE
(Addendum to Intelligence Memorandum 1117/67, 5 June 67)/2/ /2/Document 206. Summary The Shah of Iran will arrive in Washington on 22 August for a brief official visit. His visit was originally scheduled for 12 June but was postponed when the Arab-Israeli war broke out. Although Iran publicly voiced support for the Arab cause, Iran's ties with Israel were not affected and most Iranian officials were privately delighted by Nasir's humiliating defeat. The Shah has not modified his conviction that the Egyptian president poses the most serious long-range threat to Iranian security, and he will continue to press for favorable prices and terms on US military equipment to bolster his defenses in the Persian Gulf. Staunch Soviet support for Egypt and other radical Arab states appears to have resulted in a note of caution in Soviet-Iranian relations, and rapprochement is likely to proceed at a reduced pace. [Here follows the body of the paper.]
225. Memorandum From Harold H. Saunders of the National Security Council Staff to President Johnson/1/ Washington, August 18, 1967. /1/Source: Johnson Library, National Security File, Country File, Iran, Visit of Shah (con't.), 8/22-24/67. Secret. SUBJECT /2/August 22 and 23. The main purpose of your meeting is once again to reassure the Shah that you regard him highly and believe the U.S. has a stake in the success of his kind of reform. But as you know, he is a thoughtful man and is looking forward to serious talk. He will be flattered by any confidences you can share on your talks with Kosygin, your thoughts on Vietnam, your interest in Ayub, your feelings about the Middle East, and even your analysis of our own urban problems. The new factor in the U.S.-Iran equation since his 1964 visit is his increasing independence. After long dependence on U.S. aid and years of feeling that only the U.S. could protect him against Nasser and the USSR, the Shah for better than two years has been feeling his way toward a more independent policy. No one cause prompted this shift. Our cutoff of military supply to Ayub during the Indo-Pak war upset him. He has watched the changing temperature of U.S.-Soviet relations, which has made him re-think his own relations with Moscow. Domestic pressures have forced him to appear less "the American puppet," especially as Iran becomes economically more self-sufficient. As a result, he has eased into a limited relationship with the USSR. He has strengthened his relations with Pakistan and Turkey. He has supported the Yemeni Royalists and elements in South Arabia working against Nasser. He has--almost alone among the Moslem states--maintained a respectable relationship with Israel. He is still feeling his way, and you may want to talk over the pitfalls in going too fast with the USSR. The Soviet role in the Middle East war has probably given him second thoughts, but your own experience with Kosygin might help him sort out the limits of working with the Soviets. The other side of this coin for him is how heavily he can count on us for future arms supply. Under the current Memorandum of Understanding we are committed to provide another $100 million in credit sales. Even if the Church Amendment/3/ stands, we would be able to meet that obligation if you told Harold Linder to make the loan without a Defense guarantee. But the Shah probably assumes that; his main interest is whether we will go on supplying him beyond the term of the current understanding (1970). While you can say that politically we want a continuing military relationship, we'll just have to wait to see where we stand with Congress. You may want to discuss your Congressional problem with him, since he will be seeing quite a few members of Congress. /3/On August 9 the Senate Foreign Relations Committee approved Senator Frank Church's proposed amendment to the foreign aid authorization bill eliminating the "revolving fund" that the Pentagon had been using to finance arms sales to developing countries. On November 6 the House of Representatives Appropriations Committee exempted seven countries (including Iran) from the ban. More broadly, he will want to know what role we intend to play in the Middle East. One way to explain our position is to say, as you have in the past, that we don't walk out on friends, so we're not about to disengage. But then you might go on to describe the new spirit of regionalism you found on your Pacific trip and your hope that something similar might emerge in the Middle East. While we don't want to commission him for any special job, we do feel he could play an important role in making this happen. After stating your views, you might be interested to hear from the Shah what role he thinks we can play in the area in the future. A number of our moderate friends tell us frantically that we must do something to preserve the anti-Communist balance in the Middle East, but when we get down to specifics they have little to suggest. Because of your own personal interest, you will undoubtedly want to hear from the Shah himself about the progress of his reform program. Although AID will be phasing out its activities in the next year, more and more American businessmen are moving into Iran and it might be interesting to ask the Shah how, without a formal aid program, he thinks we can participate constructively. You will want to read Secretary Rusk's two memos ("General"--Tabs A and B/4/ of the attached briefing book). If you have time, I think you would find useful the "Background" tabs on Iran's relations with Communist countries (B);/5/ U.S. military aid (C);/6/ the Shah's domestic picture with charts on economic progress (D);/7/ and our Congress' attitudes toward Iran (K)./5/ We'll have a brief talking paper for you Tuesday. /4/Documents 218 and 219. /5/Not printed. /6/Document 220. /7/Document 221; the charts are not printed. Hal
226. Memorandum From the Ambassador at Large (Harriman) to Secretary of State Rusk/1/ Washington, August 21, 1967. /1/Source: Library of Congress, Manuscript Division, Harriman Papers, Special Files of W. Averell Harriman, Public Service, Kennedy-Johnson Administrations, Box 15cl, Shah of Iran. Secret; Nodis. A copy was sent to Battle in NEA. I am puzzled by one line of your memorandum to the President of August 15 on his meetings with the Shah./2/ In paragraph 4, among the topics for the President to discuss with the Shah is listed: "Soviet-Iranian military deals confuse our public and Congress." /2/Document 218. I wonder if this is a matter which the President would wish to raise since we are not presently in a good position to give the Shah any encouragement on more credit purchases of military equipment in the United States. I understand the Shah has given us assurances Iran will not purchase "sophisticated" military equipment from the Soviet Union. In addition, Iran is paying for this equipment through natural gas sales. It is certainly true that Symington and certain other Senators have expressed disapproval of the Soviet arms deal (partly because they were not informed in advance), but for my part I think the Shah has developed a more relaxed relationship with the Soviet Union and should not be discouraged from continuing this attitude. He is under no illusions, and yet is attempting to reduce tensions with his difficult northern neighbor through more normal trade and other relationships. I would hope the President would concentrate his discussion on the other two points listed, namely, Soviet objectives to break Irano-American friendship, and caution not to let economic relations with the Soviets endanger Iran's independence. Perhaps also caution not to spend too much on military at expense of economic development./3/ /3/This last paragraph is typed in all capital letters.
227. Memorandum From Arthur McCafferty of the National Security Council Staff to the President's Special Assistant (Rostow)/1/ Washington, August 22, 1967. /1/Source: Johnson Library, National Security File, Country File, Iran, Visit of Shah of Iran, 8/22-24/67. No classification marking. A copy was sent to Saunders. Lem Johns has just passed on to me the following information which I thought would be of interest to you: From 4 p.m. to midnight this date approximately 60 to 150 members of the Iranian Students' Association will demonstrate in the northeast corner of Lafayette Park. This is an anti-Iranian group and they originally requested that they be permitted to wear masks to prevent recrimination against relatives still residing in Iran. Legal counsel for the Park Service had no reason to disallow the permit and it was granted, and no one has any objections of a legal nature which would prevent their wearing masks in the District. This group originally requested to demonstrate right directly in front of the White House on the sidewalk area, and this was denied for security reasons. This means that this anti-Shah group will be in the vicinity of the White House during the arrival ceremony and State Dinner tonight for the Shah of Iran. Lem also tells me that Secret Service is advising against any walking between the White House and Blair House either after the arrival ceremony or tonight for the State Dinner. Art
228. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, August 22, 1967, 1 p.m. /1/Source: Johnson Library, National Security File, Country File, Iran, Visit of Shah of Iran, 8/22-24/67. Secret. SUBJECT /2/August 22 and 23. The Shah would like to see you alone./3/ Since the main purpose of his visit is to develop your personal relationship, this makes sense. You have nothing to negotiate but lots to talk about. Some of these subjects may fall over into after-dinner chat or into your second session. But the following cover the full range of likely topics: /3/The President and the Shah met privately in the Oval Office on August 22 from 5:28 to 7:11 p.m.--interrupted briefly by Rostow and McNamara. (Johnson Library, President's Daily Diary) No record of their conversation has been found, but see Document 236. Middle East 1. Arab-Israel. You want to see a peace that will last. You are ready to play a constructive role, but you can't force the Israelis to move. The leaders of the region have to face up to the need to end the state of war. Then maybe we can help find the terms of a settlement. You appreciate his constructive stand. What does he think chances for a settlement are? (He believes it's important to shore up Hussein.) 2. Regionalism. You think it's important for the Middle East to begin acting like a region. On your Pacific trip you saw what regional cooperation promises to do. Iran is a natural to help draw the Middle East together, because the Shah has broader contacts than most leaders. For instance, you understand the Shah, at his recent meeting with President Ayub and the Turkish Prime Minister, kept Ayub from tearing up CENTO. 3. Nasser. You know the Shah is concerned about radical Arab influence in the Persian Gulf. We are too. You hope Iran and her neighbors will cooperate in strengthening the Gulf as a little region all its own. Global 4. U.S.-Soviet relations. You'd like to tell him a little about your meeting with Kosygin--your reflections on how far the thaw goes. 5. Iran-USSR. You'd like to hear his experience with the Russians. (He has moved toward more open relations with Moscow but had second thoughts since the Middle East war. While we can't keep him from a business relationship with the USSR, we do want to urge caution. Congress gets upset.) 6. USSR-Middle East. You'd be interested in his estimate of the Soviet objectives. Moscow has made some gains but you doubt the Russians will pay the full bill to bail Nasser out. You're still certain Moscow's main aim is to drive us out of the area and undercut non-socialist governments. 7. Vietnam. You thank him again for Iran's medical unit. (He will appreciate any thoughts you want to confide on our position.) U.S.-Iranian Relations 8. Shah's independence policy. You frankly recognize that a new era is beginning in our relations and you welcome it. You are pleased that Iran's own income is increasing and that Iran's dependence on outside aid is decreasing. (AID phases out this year.) This is not the end of American participation in the Shah's development program. It's a chance for American private enterprise backed by the Export-Import Bank to enlarge its relations with all aspects of the Iranian economy. 9. Reform. You congratulate him on Iran's economic progress and would like to hear how his reform program is going. 10. Military aid. You know the Shah is concerned about the state of our military assistance. (There is $100 million in credit still to go under our current sales understanding. This is a firm contract, which we would have to find a way to fulfill even if the Church Amendment stands. The Shah is mainly thinking beyond this.) You want to continue our military relationship and we'll do the best we can within the limits Congress sets. You'd like to tell him about Congressional attitudes because he'll be seeing members of the Foreign Relations Committee Wednesday afternoon and other members of Congress at the Vice President's luncheon on Thursday. Walt
229. Telegram From the Department of State to the Embassy in Iran/1/ Washington, August 23, 1967, 2122Z. /1/Source: Department of State, S/S Files: Lot 68 D 475, Visit of the Shah of Iran, August 22-24/1967, Vol. II, Admin. & Sub. Misc., Press Releases & Memcons, V-39-B. Confidential. Drafted and approved by Eliot and cleared in draft by Meyer. Repeated to London. 25746. Subject: Iranian Oil Consortium. 1. Senior executives American member companies Iranian Oil Consortium called on Shah in New York August 22 and later gave us following report of meeting. 2. Shah made predictable plea that Iran's stability and reliability be taken into consideration in companies' planning and investment. Stressed that Arab-Israeli crisis not ended and may revive. 3. Companies replied that 1967 offtake from Iran not likely far exceed last November's estimate but might prove be 19-20 percent above 1966. Stated not possible at this time estimate increase for 1968. Stressed necessity recognize courage of moderate Arab countries in resisting radical demands against oil companies. 4. Shah concurred fully with latter point saying he would not ask companies do anything else, that if West forced out and others came into moderate Arab countries it would be bad for Iran. While stating that nothing should be done to hurt Saudis, Shah said that potential growth in Saudi oil exports should come instead from Iran. On other hand, Kuwait does not require increased oil income, Libya is weak and any increase in Libyan prosperity would only whet Nasser's appetite take country over. Shah added he knows Iran could not replace any one Arab producer except possibly Iraq. He told companies second export terminal to supplement Kharg is needed and they should step up exploration. He reported French had made no important finds but had found promising seismic structure offshore in Gulf, which, however, may prove dry. He then raised subject of trans-Turkey oil pipeline, saying Iran not willing rely on Suez Canal and that while pipeline might not be economically sensible it was politically necessary. 5. While indicating concern about reliability of canal, companies noted that increasing size of tankers and tanker fleet make pipeline politically unnecessary. (Companies have informed us they will not commit themselves to participate in pipeline project. One of reasons is they question long-term reliability of Turkey.) 6. Shah did not press oil pipeline project and turned conversation to gas, including gas pipeline to Europe and hope that companies would involve themselves in petrochemicals in Iran. He indicated desire make Iranian oil fully competitive and mentioned progress in reducing redundant labor in oil installations in Iran. 7. Companies consider conversation part of useful continuing dialogue which they and Shah find helpful. They found Shah's usual speeches milder than often in past. In sum, they feel results of conversation "not too bad," although they remain concerned that Iranian expectations will continue to exceed realities. Rusk [Continue with the next documents] |
