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270. Memorandum From Harold H. Saunders and John W. Foster of the National Security Council Staff to the President's Special Assistant (Rostow)/1/ Washington, March 18, 1968. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret; Nodis. SUBJECT You asked if there is anything in the "strange series of coincidences" cited by Iranian Prime Minister Hoveyda in the attached cable./2/ We can't rule out the possibility that something is going on, but this looks more like a case of adding two and two and getting sixteen. /2/Telegram 3681 from Tehran, March 9, is attached to the source text but not printed. There has been student unrest. It started because of difficulties with university administrators and the political content has been low. There was a teacher's strike, but as far as anyone knows, pay was the only issue. The Iranian government is worried about former Prime Minister Amini's activities, but we are unaware that he has done anything, and there is no indication that he is involved with the mullahs. Many of the mullahs have always been anti-Shah, but there doesn't appear to be any unusual activity. The Iranians are having trouble with the oil consortium, but no one has discovered any tie between the oil companies and either Amini or the mullahs. The odds are that Hoveyda--and probably the Shah--have, in typical Iranian fashion, combined a few unrelated events, some rumors and their own unfounded suspicions into a conspiracy. They had suspected the U.S. Government was involved, and, despite what Hoveyda told Armin Meyer, our protestations of innocence are unlikely to have convinced them completely. But Armin's latest audience with the Shah suggests that we've quieted suspicions for the moment. The best explanation of all this Iranian edginess is Armin Meyer's guess as to why the Shah called his ambassador to meet him in Switzerland and then had the ambassador bring back a bag full of crazy charges against Armin. If you haven't seen this, it's worth your time as background eventually for the Shah's visit (also attached)./3/ /3/A copy of telegram 3626 from Tehran (Document 264) is attached. John
271. Telegram From the Department of State to the Embassy in Iran/1/ Washington, March 22, 1968, 0125Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Priority; Limdis. Drafted by Eliot and Sober, cleared in draft by Rockwell and Battle, and approved by Eliot. 134583. For Ambassador from Battle. 1. Inter-departmental regional group for NEA considered military sales program for Iran March 21. No conclusions reached and IRG will resume discussion March 25. 2. Some concern was voiced in IRG meeting particularly as to implications of any kind of "commitment" for 5-year period following 1968. Possible that IRG may decide some further study required, e.g., on nature and requirement of military threat facing Iran and impact on Iranian economic situation of program of this magnitude. In that event, possible that final IRG recommendation on 1969-73 program might be delayed for some time which we can now not precisely estimate. Could be as much as several weeks. Given that contingency, I would appreciate your personal views on desirability your presenting Shah in near future firm USG offer regarding $100 million credit sale for FY68, indicating decision on remainder of Shah's request would be forthcoming as soon as possible. (As you well aware any IRG recommendation concerning FY68 program would still require approval by higher authority and we could not guarantee timing.) 3. Would also appreciate your view as to whether political objectives of program would be achieved if it were to be reduced to $50 million or $75 million annually. 4. Would appreciate your answer soonest prior to March 25 IRG meeting. Rusk
272. Memorandum From Harold H. Saunders of the National Security Council Staff to the Assistant Secretary of State for Near Eastern and South Asian Affairs (Battle)/1/ Washington, March 22, 1968. /1/Source: Department of State, Central Files, DEF 12-5 IRAN. Secret. Copies were sent to Rockwell, Schwartz, Critchfield, Clark, Williams, Eliot, Sober, and Brigadier General Doyle. SUBJECT On mulling over our discussion of the military threat to Iran, I should like to come back to one major point. You said several times you could not find anybody around the room who challenged the military justification for the package. I wish now that I had, because I feel that a basic challenge was implicit in everything that was said. For instance: --Stuart Rockwell led off by saying quite accurately that what we are coping with here is the Shah's assessment of what he needs. This political reality is our central problem. --Harry Schwartz, when you asked him to discuss the specific questions of Iranian absorptive capacity and the like, said quite frankly that he could not provide this kind of justification for the package. As I understood him, he said that the package is the sum of a lot of elements--the Shah's assessments of his needs, our assessment of what he can afford, our estimate of what we can afford, our estimate of what Congress will stand for, etc. But nowhere did I hear him say anything about the kinds of wars he might have to fight with the Arabs--Harry excluded the Soviet threat--and the specific kinds of equipment he'd need to fight those wars. --Jim Critchfield's eloquent description of the threat was largely a description of the world as the Shah sees it emerging. This is valid, and we have to cope with it. But there was no intelligence estimate, such as we are striving for on the Israeli-UAR front, that the Iranians could defeat the Iraqis in five days, that the balance between Syria-UAR-Iraq and Iran would tip in the radicals' favor by January 1970 or any of the other measurable dangers one might conceive if one tried to war-game the threat against Iran precisely. In short, while there was some side-talk about naval needs, no one at the meeting challenged the military element of the package. Someone said that the Shah's main objective is to be so strong as to deter attack, but we didn't take the next logical step to admit that there really isn't a pure military justification./2/ While no one challenged, nobody really justified either. What we have done is started with the Shah's first bargaining shot of $800 million and squeezed the most obvious bargaining components out of that package. Now we have reached a hard collection of items that the Shah says he needs. /2/A handwritten notation next to this sentence reads: "none." Like you, I don't question for a moment the political rationale for the program, but I think we ought to be quite candid with ourselves in admitting that the political rationale is also pretty much the military rationale. Unquestionably, the Shah needs some modernization, and I'm sure General Jablonsky must have some military rationale, but it hasn't surfaced in the IRG. You'll recall that no one argued against your 5-7 year idea on military grounds at all. All of the arguments were related to "reliability", bargaining, Congress, etc. I'm not sure that it is possible to be more precise on the military side, although I think there may be some virtue in trying. The economic problems which Maury Williams mentioned are much more measurable and do warrant a real review. But if in the course of the next two weeks, no one in the Pentagon can give us a military picture comparable to the economic one, I think we ought to reduce the military aspects of this problem to the political question of how far we can safely bargain the Shah down. Hal
273. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, March 23, 1968, 0850Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Priority; Limdis. 3869. Ref: State 134583./2/ For Assistant Secretary Battle. Summary: While conscious of problems involved, Embassy believes we should proceed with arms cooperation with Iran. Any "hitches" in U.S. attitude likely to have severe repercussions and defeat our purposes. We still can cut off arms supplies, as we did Pakistan, if Shah misbehaves in Gulf area. He is fully aware of this, but still wishes to work in harmony with us. /2/Document 271. 1. Given unhappy addition of Persian Gulf to many frustrations which are confronting our country these days, I am not surprised that some concern being voiced by our IRG colleagues re proceeding with military credit sales program of Iran. Frankly, these concerns are shared here at Embassy. However, after weighing all factors, we continue convinced we have no choice but to proceed with program promptly, if we are to retain healthy friendship with Iran and if we are to maintain effective influence not only on Shah's armament but on key role which he will inevitably play in Gulf. 2. Our manifest displeasure when British projected their exit from Gulf testifies to our expectancy that major trouble could ensue; thus, it seems to us, we should not be too astounded by initial inter-riparian frictions which so quickly erupted. No doubt we shall witness more, but despite stridency which has characterized some of Shah's initial sallies, I definitely sense restraining effect which our influence has on Shah. This is worth preserving. 3. A few straws in the wind. Shah is actively interested in rescheduling Saudi visit and Foreign Ministry is going out of its way to keep us posted. Reasonably effective Kuwait-Iran dialogue continues. Shah has reiterated instructions to IPAC to desist from drilling F-7. Admiral Rasai has told General Jablonsky and me he will not again hi-jack Americans in Gulf. When disclosing how Italians offered attractive helicopter deal while he was in Switzerland, Shah made clear to me 14th he awaits General Jablonsky's advice, another testimonial to key role which ARMISH/MAAG Chief until now plays in military decision-making process here. This too is worth preserving. 4. Curbing Shah's military appetite has been chronic problem and over years our record has not been without success. During past two years we dissuaded Shah from: two additional squadrons of F-5's, all Hawk missiles (he wanted three battalions), costly Vulcan anti-aircraft, etc. More recently we have reduced his estimate of additional needs for next five years from $800 to $500 million; we have cut tank program from 1,500 to under 1,000 including holding on to OLM M-47's; we have again talked him out of land-based surface-to-surface missile system; we have reduced his desire for self-propelled Howitzers from 222 to 50; etc. In general, we have succeeded in shaping his program to scope below armament levels of his neighbors, notably his potential enemies who are being heavily supplied by Soviets (Arabs have SAM's, bombers, etc., which Shah does not have and will not be getting). 5. Three weeks ago Shah suspected that US-Iranian military relationship, which he so much values, was on verge of rupture. His concern was prompted by reports that this Embassy was interdicting draft five-year agreement. Thanks to masterful endeavors of Under Secretary Rostow, Shah's irrational reaction was mollified. Both General Jablonsky and I have found Shah on his return to be relatively relaxed, confident in faithfulness of his American friends. Make no mistake about it, however, Shah expects early positive decision. 6. If as reftel implies we are now to suggest, no matter how indirectly, that new hitch has developed in trust which Shah has placed in USG, consequences are apt to be quite seismic. While Shah may have undue preoccupation with things military, he is probably most serious and realistic leader in all Middle East. As he sees it, vacuum which will be created in Gulf with departure of British cannot remain so. He prefers full collaboration with Saudis and other riparian regimes, but realistically assessing their capability as minimal and their longevity as questionable, he will assuredly prepare Iran for its role, hopefully in harmony with USG but if necessary alone. Thought of Russian-backed Arab radicals in Gulf is intolerable to him (as it is to us). 7. Shah is only too conscious of leverage which his purchasing US arms provides US. Most electrifying moment during my three years here was when at height of Indo-Pakistani hostilities Shah learned firmly from me that no Iranian arms could go to Pakistan, which was already suffering from USG arms embargo. Pakistan's plight made indelible impression on Shah. Fact that he is still prepared to do most of his arms business with US, knowing the restrictions to which he becomes committed, is in itself testimony to his wanting to play game our way. 8. During past weeks, I have carefully not threatened Shah. To do so could easily precipitate irrational reactions. At same time, I have assured through several intermediaries--e.g., Alam, Hoveyda, Samii, Afshar--that Shah is cognizant of fact that USG will not fuel hostilities between Iran and its trans-Gulf Arab neighbors. I am sure Shah has this message and that this is responsible for restraints noted in para 3 (as well as his crotchetiness while he was in Switzerland). Meanwhile, same message was mutually understood when in our economic review with PriMin Hoveyda I led off with point that basic assumption for our discussion must be that "stability" presently characterizing this country and Gulf region would continue. 9. In our view, it is far better to preserve our conditioning influence in foregoing positive way than by negative threats, strings and hesitancies which can only offend Iranian sensitivities and defeat our purposes. Shah can easily be driven to other suppliers, and wide diversification of his arms sources is costly, e.g., increased expense caused by influx of Soviet arms. Buying helter-skelter (we favor some diversification to Western sources) multiplies wastefully the drain on Iran's economic resources. 10. Two years ago, we in Washington made decisions re scope of Shah's military program which he thought were decisions to be made here. This precipitated his kicking over traces by making first arms purchases from Soviets. Kosygin is coming and undoubtedly will be making syrupy new offers. As long as Shah remains optimistic re American cooperation, we doubt Soviet offers will receive markedly affirmative response. 11. Re one thing we must be clear. We are not only pebble on beach. Arms peddlers galore are invading Iran. It may be sacrilegious in some American quarters to relate arms sales and balance of payments, but given critical nature of latter problem for us I wonder re wisdom of rejecting $100,000,000 per year income which is certain to go elsewhere, probably in larger measure, if we be too prudish. 12. Before submitting recommendations, it is worth noting that in world increasingly unfriendly to USG, Iran's friendship is worth keeping. There is much truth in proposition that militarily Iran is only significant Gulf riparian power. There have been no demonstrations here against US policy in Viet Nam. We still profit immeasurably from vital strategic facilities here. USAID has bid adieu. More normal trade and cultural ties are blossoming. But key to healthiness of our friendship remains military cooperation. 13. All foregoing is simply prelude to expression of hope that our IRG friends will find it possible to agree ASAP: A. To recommend to President importance of maintaining Shah's good will, key to which is our arms cooperation. B. To authorize in principle extension of our military cooperation through FY73. Realizing that should Shah's behavior in Gulf become too reprehensible we have numerous loopholes, of which Shah only too keenly aware, for suspending our cooperation. (This point should reassure those in IRG who are concerned about long-term "commitment".) C. Above all, to authorize earliest discussion with Shah of $100,000,000 FY68 tranche. If IRG cannot be persuaded re 5-year program at next sitting, least I should be authorized to do is to tell Shah extension of agreement to FY73 is awaiting outcome of current Congressional deliberations so as to assure most advantageous terms for Iran. 14. To suggest at this time reduction of annual tranche below $100,000,000 (para 3 of reftel) would under circumstances invite disaster. We do not rule out possibility that if area conditions change and if we maintain our capability for influence, ARMISH-MAAG Chief in coming years will have opportunity to keep expenditures under $100,000,000 level. 15. In short, I feel strongly present circumstances commend carrot more than stick. Latter is already understood. At stake is our relationship with Shah, our ties with Iran, and future of Persian Gulf area, re which Shah is bound to play key role. Meyer
274. Research Memorandum From the Director of the Bureau of Intelligence and Research (Hughes) to Secretary of State Rusk/1/ RNA-12 Washington, March 27, 1968. /1/Source: Department of State, Central Files, POL 15-1 IRAN. Secret; No Foreign Dissem; Controlled Dissem; Limdis. SUBJECT The Shah's personal rule of Iran is probably more secure now than at any time since he succeeded to the throne in 1940, and a primary reason for this is his conscious avowal of nationalistic policies during the last six years. This paper examines the policies followed during that period and estimates the degree of success achieved by the Shah in his search for support for his program of "positive nationalism." Abstract In 1962 the Shah formulated a six point reform program which has been broadened since then to twelve points, some of them very extensive in scope. These reforms define the Shah's concept of "positive nationalism" and are intended to gain the support of Iranians for the Shah's regime while cutting the ground from under any opposition groups which might seek support openly or clandestinely. The reforms are also intended to give the Shah the image of a modernizer in foreign countries. Although the reform program is by no means complete, it has already accomplished some of the goals the Shah set for it. In Iran's dealings with the Western oil Consortium, the Shah has cultivated the image of a nationalist hero fighting against foreign exploitation and has striven to succeed the late Mosadeq in that role. Since about 1962 Iran has gradually moved to downplay its ties with the West and to establish an independent foreign policy. The Shah has visited seven Communist countries in the last three years. This period has enabled the Shah to stress the benefits to Iran of his "positive nationalism", and the coronation of October 1967 symbolized and highlighted his accomplishments. The coronation also demonstrated the Shah's resolve to provide for continuation of the Pahlavi dynasty and played up the cultural heritage of Iran. The Shah's determination to provide a strong defense in the Persian Gulf to back up Iran's involvement in the area has been publicized as a national mission, and there is a danger that a serious oil dispute in the Gulf or a clash between Arab and Iranian residents of Bahrein (which Iran claims and which is to be a member of the prospective Federation of Arab Amirates) could prompt the Shah to involve Iranian forces to protect Iran's national honor. Despite growing prosperity and dwindling opposition activity the Shah has not permitted Iranians to involve themselves in free political activity on an organized basis. The New Iran Party, established in 1963, soon lost its pretension of representative political activity and became simply a creature of the government in power. Opposition parties have been persecuted and in turn weakened by internal dissension over what reaction they should have made to the persecution. The Shah seems to have made a conscious decision to emphasize the pursuit of higher standards of living in order to keep Iranian minds off any movement to secure participation in the political process. If the current campaign against former Prime Minister Amini is any indication, political criticism may be subject to attack in the future as a threat to Iran's material prosperity. Perhaps the Shah will allow limited political participation when he feels he has gained broad support of the people. The Shah has been able to remove from his regime the stigma of being subservient to the West, and the opposition no longer has a monopoly on nationalism. There is little doubt that the Shah's position has been strengthened. The greatest weaknesses of his regime are probably the continued rift between it and most intellectuals, and the fact that the government is highly personal, with the Shah in the central role. Removal of the Shah from political life would probably cause a major crisis and might seriously affect Iran's stability. [Here follows the body of the paper.]
275. Telegram From the Department of State to the Embassy in Iran/1/ Washington, March 30, 1968, 0049Z. /1/Source: Department of State, Central Files, PET 6 IRAN. Secret; Limdis. Drafted by Akins and Rostow on March 29; cleared by Deputy Assistant Secretary for International Resources and Food Policy George R. Jacobs, Oliver, and in draft by McClelland; and approved by Rostow. Repeated to London, Kuwait, Jidda, and Dhahran. 138990. 1. In a meeting with top executives of Esso, Mobil, Standard Oil of California, Texaco, Gulf and Iricon (morning March 28) Undersec Rostow said USG wished to have candid exchange of views with them about Iranian oil negotiations in their full political context. We did not wish to cross the delicate line between political and commercial considerations nor did we wish to take responsibility for the negotiations. But there was a deep national interest in a mutually satisfactory outcome for the negotiations at this time. The Consortium came into being with special anti-trust and other privileges by reason of such political considerations. He wished to discuss directly with the responsible leadership of the companies the political factors we saw impinging on the negotiating process. So far as the Persian Gulf was concerned, we faced a national security problem in view of the British withdrawal, and the risk of penetration of weak Gulf States by movements of radical Arab nationalism, as well as by more direct Soviet interventions. In that perspective, Iran was the keystone of American plans. We wished to have equal friendship with Iran and with Saudi Arabia, and close cooperation between them. At this point, Iran was clearly the stronger partner, progressive and developing. But Saudi cooperation with Iran was indispensable from every point of view, political, psychological and geographic, if stability in the Persian Gulf was to be assured. Rostow reviewed recent history and present prospects of efforts to bring Shah and Feisal together, and stressed importance of an oil settlement compatible with the necessities of that process. But Persian Gulf problem was intimately linked to Middle East crisis as a whole. After reporting on problems of M.E. since Nov. 22 S.C. Resolution, Rostow said we regarded the situation as increasingly grave. UAR was blocking progress on the Jarring Mission. And Syria--perhaps UAR as well--was training and sending out terrorists on a very dangerous scale. Jordan had a Vietcong on its territory, as Laos does, and could no longer control it. In the absence of peace negotiations, Israeli reprisals were inevitable, despite our urgent efforts to prevent them. As a result, there was a serious possibility of renewed general hostilities in the Middle East, with incalculable potentialities. We were working on a crisis footing to head off hostilities, but we could not be sure of the outcome. 2. Rostow referred to Shah's statements that he cooperated with West at his great risk during crisis last June. If he felt this cooperation not recognized through favorable treatment by Consortium, there was possibility he would not cooperate with West in new crisis. Rostow also said withdrawal of British from area made it necessary for Iran to cooperate with Arabs in Gulf and in a new round of hostilities he might not be willing risk their wrath by breaking Arab blockade again. As companies knew, even temporary boycott of Middle East oil, if it included Iranian production, would be catastrophic. 3. Iran, he said, has written $5.9 billion into its development plan and Shah would not change it. We know companies cannot give Iran all it wants for its plan but we also believe that if there is some increase in earlier estimates there will be chance of averting confrontation and new crisis in Iran this year. 4. Rostow asked without prejudice about possibility of investment commitments, raising APQ, altering over-lift arrangements to permit crude-hungry companies to take more oil, on equitable terms, increasing refinery throughput, and making special allowances for British Petroleum if it decided to reduce Abu Dhabi production in favor of Iran. Desirability of equality of treatment between Iran and Saudi Arabia was stressed, and generally accepted. Companies said they are examining all these possibilities and said all offered some room for adjustment but they gave no definite assurances on any. 5. They pointed to certainty more favorable treatment Iran would result immediate demands from Arab and other producing countries which they could not meet. In reference this as well as to willingness French other "oil hungry" companies to take more cost oil, they said such oil could only be sold at expense current marketing since demand was being fully met. Rostow said USG recognized all alternatives were impossible, but we would weigh the political value of a settlement with Iran very highly. 6. Companies asked USG attempt convince Iran that Consortium trying help it meet development goals. Rostow said we had done this repeatedly and would do so again, if companies assured us they would make genuine effort to reach satisfactory agreement. This assurance was given. To be effective, companies would probably have to improve their estimates and do everything economically feasible to help Iran. Companies said they knew any approach would have to be on this basis. 7. At end of meeting question was asked whether USG seriously thought risk of confrontation, and of rash and destructive action by Shah, was high. Rostow answered affirmatively, and said our concern over this risk was the subject matter of meeting, and the reason it was called. 8. Company position throughout meeting was neither hostile or negative and we believe they will endeavour seriously to devise new offer before April 20. Clearly any new offer will be below Iranian demands but we hope enough will be offered to avert crisis this year. Rusk
276. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, April 3, 1968, 0910Z. /1/Source: Department of State, Central Files, POL 7 U.S./McCLOY. Secret. Repeated to Dhahran, Jidda, Kuwait, London, and Ankara. 4015. Persian Gulf. Summary: Shah reviewed with John McCloy his concern re Persian Gulf and re Soviets in Mideast. McCloy urged statesmanship. Shah is particularly disturbed re future USG policy. 1. During hour and half discussion with John McCloy at Caspian April 1, Shah set forth his well-known views re Persian Gulf. McCloy received impression Shah more interested in mid-Gulf islands than Bahrein. Shah claimed islands are Persian and for British to turn them over to amirs would be "affront." Stressing Faisal is his friend, Shah gave impression his irritations directed more at British than Arabs. 2. Shah reviewed danger of Soviets gaining control of Mid-East oil spigots in order to compel Western Europe to dance to Soviet tune. Expressing view Europe is far too complacent and De Gaulle merely serving as "jackal" for Soviets, Shah deplored build-up of Soviet fleet in Mediterranean, conversion of fertile crescent to "red crescent," Soviet exploitation of Arab-Israel conflict with imminent threat to Jordan and King Hussein. He urged USG support "regional strength," particularly Greece, Turkey (which is unfooled by Soviets) and Iran. 3. Shah seemed shaken by prospective loss of President Johnson's leadership. He hoped President's move does not foreshadow shirking by USG of its key responsibilities in Viet Nam and in world. Any "uncertainty" re USG's "steadfastness" would cause loss of faith in U.S. commitments with devastating effect worldwide. Shah urged there be no diminution of USG's statesmanship, vigor and decision. 4. McCloy in turn urged Shah to demonstrate statesmanship in keeping Persian Gulf from being added to major problems which confront US. He reminded Shah Iran is big progressive country and Shah a respected leader who could afford to be big in dealing with his neighbors. Shah contended political concessions are difficult if he is to retain respect and leadership capability. 5. While consortium problem was scarcely mentioned by Shah, Alam later outlined in detail Iran's needs as well as alternatives which GOI considers open to consortium. McCloy reiterated what he had told Hoveyda that GOI should avoid any "rupture" in its profitable relationship with oil companies. Meyer
277. Record of Meetings of the Interdepartmental Regional Group for Near East and South Asia/1/ IRG/NEA 68-16 Washington, April 5, 1968. /1/Source: Johnson Library, National Security File, NSC Files of Harold Saunders, Iran, 1/1/68-1/20/69. Secret; Limdis. Drafted by Sidney Sober. Record of IRG Meetings--March 21 and April 3, 1968 The IRG devoted both meetings to a consideration of proposed arms credit sales to Iran. The IRG reviewed the analysis and recommendations of the various interested agencies as well as of Embassy Tehran, directed primarily to a proposal for a $600 million, six-year (FY 1968-FY 1973), credit sales package. (See attachments to IRG/NEA 68-13 and 68-14 for pertinent papers.)/2/ /2/IRG/NEA 68-13, "Proposed Arms Sales to Iran," March 21, and IRG/NEA 68-14, with the same title, April 3, are in Department of State, NEA/RA Files: Lot 71 D 218, IRG/NEA Basic File, 1966-68 (Final). Political Factors. The IRG agreed that our arms supply relationship has a vital importance in our overall ties with Iran, and that--given the Shah's great concern over Iran's security problems--our response to the Shah's current request for arms sales in the years immediately ahead will have a decisive influence on the pattern of our overall relationship with Iran for the next several years. The benefits of our relationship with Iran run the gamut from valuable collaboration with our own military and intelligence endeavors based in Iran, to the intangibles of friendly cooperation of an ally on the international scene. Although the Shah has desired to evince a greater degree of "independence" in his foreign policy and has taken steps to improve Iran's relationship with the U.S.S.R., Iran remains a loyal supporter of CENTO, retains a realistic awareness of long-range Soviet intentions, and has made it clear it wishes to keep its close ties with the United States. It was noted that our relationship with Iran assumes added importance in light of the increased Soviet threat in the Middle East and the continuing instability in the Arab world. The Shah is concerned over the implications of strong Soviet support for the radical Arab states, with whom he sees Iran potentially in conflict. It was noted that the forthcoming British withdrawal east of Suez will enhance Iran's importance in future developments in the Persian Gulf area, in which the United States has key strategic and economic interests. Military Factors. The CIA member cited various recent developments which have affected the Shah's view of Iranian security problems and which have impelled him to modernize and strengthen Iran's security forces. These developments include the USSR's supply of the radical Arab states with modern weapons; the UK's announced withdrawal from the Persian Gulf by 1971; increased Soviet naval activity in the Mediterranean, and the assumption that the Soviets will seek to extend their influence as broadly as possible east of Suez; the pressure on existing US military forces in connection with the situation in Southeast Asia and the Shah's probable concern as to our ability and willingness to provide rapid support to Iran in the event of an external aggression. The JCS member noted that Iran must orient a large portion of its military defense against the potential Soviet threat, although no Soviet military action against Iran is foreseen in the years immediately ahead. The Shah's major external security concern is for the threat posed by the UAR and other radical Arab nationalists to the oil-rich Khuzistan area. The Shah is anxious to procure sufficient air defense aircraft, antiaircraft and naval equipment to counter a potential UAR or UAR/Iraqi air and naval threat to southeast Iran and the Persian Gulf. His reorganization of the Iranian Ground Forces, with greater emphasis on armor and mobility, stems from the size of his country and the diversity of the current threat in general--in particular the tank threat posed by a potentially hostile Iraq. The IRG agreed that it was impossible to relate any projected level of arms supply precisely to any given threat or combination of threats. It is uncertain, for example, to what extent radical Arab forces constitute a real military threat; what combination of radical Arab forces might threaten Iran; and just what military capability Iran would require, at a given time, to counter such a threat. These questions involve both quantitative and qualitative issues. Recognizing these uncertainties, the JCS member concluded nevertheless that Iran needs solid US support, in the form of modern arms and equipment and appropriate military training and advice, in order effectively to deter or defend against potential military action by radical Arab forces. The JCS member noted that the currently proposed program for modernizing and building up Iran's military establishment over the next half-decade has been developed in close consultation by the Chief of the U.S. Military Assistance Advisory Group and Iranian authorities. Iran's ability to absorb the equipment in question was implicit in the development of the program. In summary, the JCS member stated, the program made sense from a military viewpoint. Economic Factors. The IRG devoted considerable attention to the question of Iran's economic situation and its ability to finance a major program of military reinforcement. It noted Iran's impressive record of an 8-9% annual economic growth in real terms in the last three years in a climate of price stability. Rising oil revenues have permitted a steady increase in expenditure for economic development as well as for defense. It noted that Iran's new Five Year Development Plan, which went into operation on March 21, 1968, aims at increasing GNP at an average annual rate of 9.3%. This Plan foresees a rise in the proportion of fixed public and private investment to GNP from 21% in 1967 to 25.3% over the 5-year period. The members agreed, however, that many uncertainties and intangibles make it impossible to predict with assurance the precise course of Iran's economy over the next several years. A major uncertainty is the GOI's projection of oil revenues, which depends on the outcome of discussions now under way with the Oil Consortium. It was agreed that the GOI projection of a 17% average annual increase is too high, but that there would nevertheless be an appreciable rise in Iran's oil revenue, perhaps at a 12% annual rate. Doubts were also expressed as to whether Iran's non-petroleum exports will rise as fast as projected by the GOI, and whether the GOI could hold down its defense expenditures as planned. The AID member expressed particular concern that a shortfall of oil revenue could force a cutback in proposed development expenditure by Iran's Plan Organization; such a cutback could have internal political repercussions as well as economic implications, since it could reduce government investment for the next few years below the rate estimated for 1966 and 1967. The IRG agreed that, although there was cause for optimism as a result of Iran's past record and that, although there was no cause for concern as to the $100 million military sales program proposed for FY68, it is most important that the GOI arms program not interfere unnecessarily with Iran's economic development and progress. The actual course of Iran's economic expansion will have to be kept under careful review, particularly regarding Iran's ability to finance an arms buildup such as it proposes. The balance between economic progress and defense outlay will continue to be a prime factor in our consideration of Iran's specific request for arms each year. Congressional Factors. The IRG noted recent Congressional concern over arms races and over possible excessive expenditure on defense by foreign countries with which we have an aid or supply relationship. It also took note of the fact that our ability to supply arms on credit to a country such as Iran after the end of this fiscal year will depend upon passage of new military sales legislation now before the Congress, and also on the availability of appropriated funds to support annual credit sales programs. It was agreed that these factors tended to militate against our seeking to enter into any more or less firm "commitment," however hedged, involving precise credit sales levels for several years beyond the current fiscal year. The Chairman noted that any type of multi-year proposal would probably have to be discussed with Congressional leaders. The AID member raised a question as to the need for a Presidential determination in the event of an increase in the military credit sales program for Iran in FY 1968, above the illustrative $50 million presented to the Congress last year, under the final proviso in the military assistance item of the Foreign Assistance and Related Agencies Appropriation Act, 1968. There is a difference of view among legal experts in State, Defense, and AID on this question. It was agreed that this issue should be clarified, but that it was not substantively critical to the larger question before the IRG inasmuch as any recommendation on the FY 1968 credit sales tranche would require Presidential approval. Annual Review. The members attached crucial importance to the annual review of political, military, and economic factors to be considered prior to a decision on each annual tranche of military sales to Iran. It will be necessary, for example, to have in mind the development of relations between Iran and Saudi Arabia and the other Persian Gulf entities; the development of the threat from the radical Arab states; the economic situation in Iran, and particularly the effect of defense outlay on Iran's economic development program; and our own military requirements, financial situation and credit availabilities. The Chairman emphasized that the annual review will be a key part of any multi-year arrangement with Iran. The precise level and composition of each annual sales program would be decided upon the basis of the annual review. Conclusions and Recommendation. The IRG considered a proposal for a six-year (FY 1968-FY 1973), $600 million military credit sales proposal for Iran, as well as various alternatives, in the light of the above factors. It was agreed that we have an overriding political interest in offering to the Shah an arms supply proposal that would be adequate to bolster the Shah's confidence in our desire to retain our intimate military relationship with Iran; to keep him from feeling that he had no choice but to turn to the Soviets for sophisticated arms; and to support continuance of our present close and constructive overall ties with Iran. It was agreed that some form of multi-year understanding is essential for this purpose. It was also agreed that it would be desirable, if possible, to conclude such an arrangement with Iran before the Shah's expected visit to Washington on June 12, 1968. The IRG agreed to recommend to higher authority a proposal as follows: To protect our important interests in Iran, to assist the maintenance of stability in the Middle East, and to ensure the continuation of the valuable U.S.-Iranian relationship in the military field, while at the same time maintaining a requisite degree of flexibility, the U.S. should before June 1: 1. Offer Iran a credit sales program for FY 1968 on concessional terms for a minimum of $75 million and, subject to the availability of necessary additional funds, a maximum of $100 million. (This to be depend-ent on funding arrangements and global availability of funds.) 2. Tell the Shah that we recognize his desire to work for the five-year plan he developed with the Chief of our MAAG as Iran's program for modernization for the next five years, and engage to cooperate with him in his attaining this goal on the following basis: Governed by an annual review by each government of the political, military, and economic factors bearing upon the size, nature, and funding of each annual program, the U.S. declares its intention each year to seek Congressional authority and appropriations for such cash and credit sales as both governments would agree were indicated to move toward accomplishment of the Shah's program. The IRG also agreed that it would be necessary for the U.S. to undertake intensive annual internal studies on the political, economic, and military implications of the Shah's military program, commencing with timely preparation for the FY 1969 tranche. SS MEMBERS PRESENT ACDA: Mr. Van Doren State: Mr. Rockwell; Mr. J. Wolf; Mr. Eliot; Mr. J. Campbell (4/3)
278. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, April 9, 1968, 1005Z. /1/Source: Department of State, Central Files, POL IRAN-US. Secret; Priority; Noforn; Limdis. 4118. For Assistant Secretary Battle. Summary: Prompted by his concerns re Persian Gulf security in future, Washington delays, and his profound shock at President's decision not to seek re-election, the Shah is anxious for a yes or no from USG re his five-year military program. Two temporizing alternatives are suggested in absence of greenlight from IRG. 1. Alam called me in evening eighth (for third time in five days) to convey Shah's anxiety re our military credit program. Alam spoke from notes taken at Shah's direction. 2. Alam said Shah still concerned re delay in Samii's visit to Washington and New York. My previous endeavors to counsel patience have only had limited effect. 3. According to Alam, Shah wishes to know as soon as possible whether he can count on US for his military needs in next five-year period. Shah reiterated he wished to retain US orientation as far as Iranian military is concerned. He is buying arms, not seeking grant assistance. He has committed himself not to acquire sophisticated weapons elsewhere, but he must know whether he can rely on U.S., not just for one year, but for implementation his five-year program. (My impression was that he may have had some info from Ansary indicating USG present thinking concentrating on FY68 tranche.) 4. Alam went on to say that Kosygin offered provide any of Iran's military needs, whether planes, tanks or ships, and Russians prepared to make firm unlimited commitment through 1975. Of course, Shah had ignored this Soviet ploy. 5. Recalling Alam's report to us on Shah-Kosygin talk (Tehran 4039),/2/ I noted Alam had not mentioned arms as having been discussed, even though I had asked specifically re that subject. Alam surmised that Kosygin had made pitch to Hoveyda. /2/Dated April 3. (Ibid., POL IRAN-U.S.S.R.) 6. Obviously detecting some annoyance on my part at what appeared to be crude intimidation, Alam assured me Shah's mentioning Soviet offers was not an attempt at "bullying." Alam did, however, followup this part of conversation with Shah-suggested disclosure re probable Moscow visit in July (Tehran 4116)./3/ /3/Dated April 9. (Ibid., POL 7 IRAN) 7. In concluding discussion re military, Alam noted Shah will certainly discuss this subject with President Johnson in June. He went on to say how devoted Shah is to President and cited how Shah was affected by President's cautions against excessive ($800 million) arms expenditures in most recent communication this subject./4/ /4/Document 254. 8. Comment: Although reaction to a pitch of this kind is always visceral, one must resist saying "go ahead deal with Russians" and try to understand Shah's present deeply felt dilemma. I need not repeat our analysis (Tehran 3869)/5/ here, but points made remain valid. Announcement of British withdrawal from Persian Gulf has plunged Shah into profound preoccupation with Iran's role in preserving security and stability of that area, in the face of radical Arab adventurism and historic Russian aims. /5/Document 273. 9. On top of that has been added an equally profound factor which it is impossible to overestimate. The Shah probably more than any other world leader has been shaken by the President's announcement not to seek re-election. He considers President true personal friend in whom he has utmost confidence. He cannot envision any successor so well disposed to maintenance of Iranian-US relations, including in field of military cooperation. On contrary, he despairs that successor President may curtail arms cooperation which is core of current US-Iranian relationship. 10. It is because of this uncertainty, coupled with fact that Shah has already been waiting for some six months for answer to his question, that Shah will insist on reasonably clear statement of US intentions over next five year period. Without it, he is fully capable of taking undesirable steps. It was my hope (Tehran 3869) that we could convince our IRG colleagues of importance of favorable decision, at same time assuring them that no one knows better than Shah that we have adequate loop-holes to curtail our military cooperation any time Shah misbehaves or we run into Congressional troubles. 11. Since there has been no greenlight yet received here pursuant to two recent IRG meetings, I would suggest either of following actions: A. Arrange for early visit of Mehdi Samii to Washington to discuss commercial credit in general and preliminary terms. B. Letter from President to Shah referring to Shah's démarches to me, counselling patience, assuring Shah that five-year program is receiving close and expeditious attention, expressing hope for an affirmative response before June and indicating President looks forward to discussing this and other subjects with Shah in June./6/ /6/In telegram 4125 from Tehran, April 10, Meyer reported that for the moment, the Shah's temperature regarding the military credit program had subsided a bit. (Department of State, Central Files, DEF 19-8 U.S.-IRAN) Meyer
279. Telegram From the Department of State to the Embassy in Iran/1/ Washington, April 9, 1968, 2226Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Priority; Limdis. Drafted by McClelland; cleared by Eliot and Rockwell and in substance by Sober, G/PM Director for Operations Joseph J. Wolf, Jack Reed, and Ligon (OASD/ISA); and approved by Battle. Repeated to CINCSTRIKE/CINCMEAFSA. 144116. Ref: Tehran 4073;/2/ CHARMISH/MAAG ARCG 7076./3/ /2/Dated April 6. (Ibid., DEF 12-5 IRAN) /3/Not found. 1. We are proceeding urgently toward decision on US military credit sales program for Iran. No final decision on program has yet been reached but we hope to obtain such decision shortly. Until program approved, would be premature commence negotiations with GOI officials including Samii. 2. FYI. IRG/NEA agreed recommend modified program April 3. We plan submit program for approval by higher authority this week. Congressional consultations would follow this approval. (Summary of IRG meeting decisions being pouched.) End FYI. 3. Battle told Ansary April 9 that while we have many problems connected with Congressional and legislative considerations, there is no disagreement within executive branch on basic issue of our wanting continuing relationship with Iran in military field. Battle advises Ansary not to worry, including about time it will take us reach decisions, and said Shah could be reassured. Rusk [Continue with the next documents] |
