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280. Memorandum From Secretary of State Rusk to President Johnson/1/ Washington, April 19, 1968. /1/Source: Johnson Library, National Security File, Country File, Iran. Secret. SUBJECT Recommendation: With the concurrence of the Secretary of Defense, I recommend that you approve, subject to the satisfactory conclusion of Congressional consultations: 1. An offer to Iran of a military 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 is to be dependent on funding arrangements and global availability of funds.) 2. Informing the Shah that we recognize his desire to work toward a program of military modernization for the next five years and that we engage to cooperate with him in his attaining this goal on the following basis: The United States Executive Branch declares its intention each year to seek Congressional authority and appropriations for such credit sales as both governments would agree were indicated to move toward accomplishment of the program mentioned above. On the part of the United States the amount of authority and funds sought, and the amount of sales made for cash, would be subject to the results of a yearly review, with the Government of Iran, including reviews of Iran's economic development and military programs, as well as an assessment of the effect of military purchases on the Iranian balance of payments and budgetary situation. The actual amount of credit made available to Iran in each year will of course depend on the amount of credit authorization and appropriations approved by the Congress and on other U.S. requirements worldwide. If the amount of credit authorization and appropriations approved by the Congress proves in future years to be insufficient for the mutually agreed needs of Iran, the Executive Branch declares its intention to do what it can to help Iran obtain credits from non-Governmental banking sources. Discussion: Since military credit sales were introduced in 1964 as a way to shift Iran from grant aid to self-financed procurement, U.S. equipment costing some $300 million has been sold to Iran. Two credit tranches of $50 million each remain to be released under the 1964 U.S.-Iranian Memorandum of Understanding; recommendation 1 (above) proposes to combine them for release in FY 1968 as the first increment of a $600 million, six-year procurement program developed by Iran to provide for Iranian military needs after U.S. grant aid terminates in FY 1969. There are no political, economic or military reasons not to proceed with a $75-100 million credit in FY 1968, and we recommend offering it to Iran at terms of 5-1/2 percent interest, with seven years to repay. Several possible funding alternatives are enclosed./2/ Equipment to be purchased is designed to modernize the Iranian military forces and is planned to include F-5 aircraft, M60 and Sheridan tanks, armored personnel carriers, a surface-to-air missile unit for Iran's destroyer and self-propelled artillery. /2/Attached but not printed. Since last summer, the Shah has been pressing us for a new commitment on credit sales in the 1970's. The comprehensive program he has developed in conjunction with his U.S. advisers is a logical follow-on to our grant aid program, and we believe it essential, in order to protect our important interests in Iran and to assist the maintenance of stability in the Middle East, that we be forthcoming in response to his requests for military credits to support it. Our arms supply relationship is of decisive importance to our overall ties with Iran. These ties bring us important benefits, including collaboration on military and intelligence operations, and the intangibles of friendly cooperation with an ally on the international scene. Moreover, the importance of our ties with Iran has increased as a result of the announced British withdrawal from the Persian Gulf, the growing Soviet threat in the Middle East, the continuing instability of the Arab world, and real doubts about long term continuance of U.S. facilities at Peshawar. Nevertheless, I cannot recommend that the United States undertake at this time a firm commitment for the full $500 million additional credit program (FY 1969-73). Uncertainties about Congressional authorization of future arms credits and the level of appropriations, about the effect of future defense spending on the Iranian economy and about the development of Iranian-Arab relations make it prudent to base the program after FY 1968 on the outcome of thorough annual political, military and economic reviews. Some form of multi-year understanding for future years is, however, essential to meet our objectives in Iran, and we believe that recommendation 2 (above) should achieve this purpose while at the same time maintaining a requisite degree of flexibility. We are fully aware that, by adopting this cautious policy, we run the very real risk that the Shah may consider the proposed arrangement too indefinite and therefore insufficient. This could trigger another round of bargaining or, alternatively, might cause him to turn to other arms sources, including the USSR and Eastern European countries. Should the Shah react in this manner, we believe your June 12 luncheon with him could be critical, and we would, if it proves necessary, propose additional course of action for your consideration prior to that date. The foregoing recommendation has been submitted by the Interdepartmental Regional Group for the Near East and South Asian Affairs under Assistant Secretary Lucius D. Battle's chairmanship after a careful review of the factors involved and of our interest. The record of the IRG/NEA meetings on the subject is enclosed./3/ /3/See Document 277. After satisfactory informal Congressional consultations, we will send a letter formally advising the Congress of your decision to increase the program for FY 1968 and the major reasons for doing so. Nicholas deB. Katzenbach/4/ /4/Katzenbach signed for Rusk.
281. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/ Washington, April 29, 1968, 12:55 p.m. /1/Source: Johnson Library, National Security File, Country File, Iran. Secret. Attached to a May 1 memorandum from Rostow to the President that reads: "You should know that there is some urgency in connection with a decision about the Iranian arms package. There was considerable delay in the bureaucracy in developing an agreed position. Meanwhile, the Shah is becoming restless, having had reason to expect a response earlier. You will recall that he mentioned the matter to John McCloy, underlining that he was, after all, willing to pay for these arms and that our common strategic interest in the area required him to be strong." SUBJECT Shortly after his visit last August, the Shah wrote you/2/ that he intended to embark on a new five-year $800 million program for further modernizing his armed forces. He is now down to $600 million for six years, and this will be uppermost in his mind when he sees you June 12. /2/Document 242. There is no question that the Shah will go ahead with some such program. The issues are how to keep it from slowing his economic development and how to keep him from turning to other suppliers. No one has serious reservations about going ahead with the proposed $75-100 million program for FY 68. Nick Katzenbach recommends you approve this subject to satisfactory Congressional consultations. He would start at $75 million and hold the additional $25 million for you to throw in when the Shah comes. The real issue is how we assure the Shah that we will participate in this program without actually committing ourselves. He says he has to know what he can count on. We can't say for sure, and we have good reason for not wanting to jump in all at once even if we could: --We don't know what military sales authority Congress will approve or how much it will appropriate. We don't want to tie up funds until we see how much we have to divide worldwide. --We're wary about Iran's committing so much to military expenditures so far ahead. We'd like to go year by year. --When the British withdraw from the Persian Gulf, Iran and Saudi Arabia face a number of difficult issues there. We want to be careful about how we build up a new sub-regional super-power. Offsetting these reservations is our need to maintain a close relationship. Now that AID has phased out, our military program is the major concrete manifestation of that relationship. We look to the Shah to maintain a pro-western Iran and depend on him for even expanding our sensitive intelligence collection activities. The Shah believes he must be strong enough militarily to deter any attack--overt or subversive--by the Arab radicals. He is worried, as he told John McCloy, about Soviet gains in the area. He knows the British are pulling out. He fears even more that our policy since last June indicates diminished US interest in the Mid-East. Therefore, he wants to modernize his forces but, perhaps even more important, he wants some reassurance of our continuing concrete interest in his security. It's quite possible that we may not be able to satisfy him. To tread the narrow line between general assurance and specific commitment for the next five years, State and Defense have devised the finely worded paragraph under recommendation #2 in Nick Katzenbach's attached memo./3/ Essentially, it says we'll do what we can to help with his five-year program but we just can't commit ourselves that far ahead. We'd declare Executive Branch intention to push ahead year-by-year toward accomplishment of the Shah's program. You will want to read the fine print. /3/Reference is to Document 280. The real problem is not the approval of this well-hedged formula. The problem will be whether you feel you can make this stick with the Shah when you see him on June 12. You will have the tough job of trying to persuade him of the continuity of the US-Iranian relationship without knowing either what the Congress will do or who your successor will be. Your line will have to be that (a) anyone who sits in your seat will be impressed with the necessity of a strong continuing US-Iran relationship and (b) we hope he will bear with us through this transitional period. In the face of this difficulty, I recommend you approve this approach as a start. Regrettably, there seems little chance of devising a more flexible position for you, at least until Congress acts. You will want to read the attached memos from Charlie Zwick/4/ and Nick Katzenbach. /4/Attached but not printed. Walt Approve the $75-100 million sale for 1968 and the hedged assurance that we will try to help with the rest of the program/5/ See me Put on Tuesday lunch agenda /5/The first and last options are checked.
282. Telegram From the Department of State to the Embassy in Iran/1/ Washington, May 2, 1968, 2350Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Exdis. Drafted by Katzenbach; cleared by Battle, Walt Rostow, Deputy Assistant Secretary for Politico-Military Affairs Philip J. Farley, and Warnke; and approved by Katzenbach. 157500. Ref: Tehran 4506./2/ Eyes Only Ambassador from Under Secretary Katzenbach. /2/In telegram 4506 from Tehran, May 2, Meyer reported that Alam had told him the Shah's patience regarding the arms package was wearing thin. Meyer also expressed his own concern over the package tentatively approved by the IRG. (Ibid.) 1. Military credit program may have struck you as "typical IRG lowest common denominator product" but it has in fact received my closest attention and study, incorporates the strongly held views of the Deputy Secretary of Defense and has now been approved by the President. 2. We are about to take next step of Congressional consultation and if all goes well, we will be instructing you shortly. In the mean time, as indicated, we are in process of determining whether additional funds, over $75 million, are available so that offer can be raised to $100 million. I cannot tell you today if that decision will be made prior to sending your initial instructions. 3. The Shah is not the only one with political problems. Rusk
283. Telegram From the Department of State to the Embassy in Iran/1/ Washington, May 18, 1968, 1921Z. /1/Source: Department of State, Central Files, DEF 19-8 U.S.-IRAN. Secret; Immediate; Limdis. Drafted by McClelland on May 17; cleared by Eliot, Rockwell, and Saunders and in draft by Sober, Schwartz, Kuss, Assistant AID Administrator for Near East and South Asia Maurice J. Williams, Lewis D. Junior (G/PM), Knute E. Malmborg (L/E), and Assistant to the Secretary of Treasury for National Security Affairs Raymond J. Albright; and approved by Katzenbach. Repeated to CINCSTRIKE. 166827. Subject: Military Credit Sales Program for Iran. 1. The President has approved, Congressional consultation has been completed, and you are hereby authorized to inform the Shah of USG approval of the following Military Credit Sales Program for Iran: a) USG offers to Iran a military 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 is to be dependent on funding arrangements and global availability of funds.) b) You should tell the Shah that we recognize his desire to work toward a program of military modernization for the next five years and that we engage to cooperate with him in his attaining this goal on the following basis: The United States Executive Branch declares its intention each year to seek Congressional authority and appropriations for such credit sales as both governments would agree were indicated to move toward accomplishment of the program mentioned above. On the part of the United States the amount of authority and funds sought, and the amount of sales made for cash, would be subject to the results of a yearly review, with the Government of Iran, including reviews of Iran's economic development and military programs, as well as an assessment of the effect of military purchases on the Iranian balance of payments and budgetary situation. The actual amount and terms of credit made available to Iran in each year will of course depend on the amount of credit authorization and appropriations approved by the Congress, on prevailing credit market factors, and on other U.S. requirements world-wide. If the amount of credit authorization and appropriations approved by the Congress proves in future years to be insufficient for the mutually agreed needs of Iran, the Executive Branch declares its intention to do what it can to help Iran obtain credits from non-Governmental banking sources. 2. You should also tell the Shah that we are anxious to complete the credit negotiations for the FY 1968 increment as soon as possible and must complete them prior to June 30. We therefore propose that a U.S. negotiating team be sent to Iran about June 15 for this purpose. If the Shah prefers, however, the USG would be pleased to receive an Iranian negotiating team in the United States at that time. (FYI. Negotiations should commence after June 12. End FYI.) 3. You should inform the Shah that the President's action is a token of our confidence in the Shah and in Iran, that the equipment we are providing will be responsibly employed to the maintenance of peace and stability in the area. We further hope that with this arrangement made, Iran can devote the fullest possible resources to economic development and social reform. 4. You should tell the Shah that as in former years we have carefully reviewed the economic data provided by the Central Bank and congratulate Iran on its continuing economic progress. Although we have concluded that Iran's economy is making good progress and warrants a large credit increment this year, there are a few points of concern. For example, we note that security expenditures have grown very rapidly over the last few years and we hope it will be possible for the GOI to keep the increase closer to the growth in the economy and, in any event, no higher than that projected in the Central Bank figures (11.6 percent increase per year) in future years. We are also concerned that increasing payments for arms purchases may reduce total public investment and thus reduce the rate of economic growth. We believe economic improvement and social betterment are best assurance of security in long run against threats to Iran and urge that Iran's economic progress not be adversely affected by her military expenditures. Rusk
284. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, May 20, 1968, 1745Z. /1/Source: Department of State, Central Files, DEF 19-8 U.S.-IRAN. Secret; Immediate; Limdis. Repeated to CINCSTRIKE. 4857. Ref: State 166827./2/ Subject: Military Credit Sales for Iran. /2/Document 283. 1. Although at first insisting he must have iron-clad five-year commitment, Shah 20th eventually bought my thesis that USG is treating him very well and that in reality qualifications attached to proposed credit sales program are consistent with constitutional factors which have heretofore regulated successful US-Iranian military cooperation. 2. Shah said Iran's immediate military needs would exceed100 million but agreed confer further with ARMISH/MAAG Chief Jablonsky re essential FY69 requirements. If USG credit restricted to $75 million, Shah said, obviously orders for at least $25 million must be placed elsewhere. 3. Telegraphic reports on this/3/ and other subjects covered during two-hour conversation will be forwarded tomorrow. In general, all went well and Shah remains solid friend. /3/In telegram 4866 from Tehran, May 21, Meyer reported in detail on his May 20 discussion of the military credit sales program for Iran with the Shah. (Department of State, Central Files, DEF 19-8 U.S.-IRAN)
Meyer
285. Memorandum From John W. Foster of the National Security Council Staff to the President's Special Assistant (Rostow)/1/ Washington, May 21, 1968. /1/Source: Johnson Library, National Security File, Country File, Iran, Memos & Miscellaneous, Vol. II, 1/66-1/69. Secret. SUBJECT One problem you might like to begin thinking about again as we prepare for the Shah's visit (June 12) is the situation in the Persian Gulf. It's bound to come up. As you know, both the Shah and Faisal understand that they must cooperate to prevent outside interference in the Persian--or "Arab"--Gulf. The two rulers have much in common--especially a dislike for Nasser--and, aside from dividing valuable underwater oil concessions which could be worked out, no specific bilateral problems in the Gulf. There is a basic conflict, however, between the Iranian assumption that Iran has the mission of controlling the Gulf, and the Saudi assumption that Saudi Arabia is responsible for everything on the Arabian peninsula. This has led to Saudi support for the Arab sheikhdoms on the Gulf and the sheikhs do have conflicting claims with Iran. The nine British protectorates in the Gulf recently formed a Federation of Arab Amirates. So far the organization has not found workable machinery, but the nine rulers keep holding meetings in an effort to create a viable confederation. Apparently they are going to get King Faisal's blessing. The trouble is that the Shah claims part of their territory. Iran has a longstanding claim to Bahrain, one of the nine Amirates. The Saudis have tried to play down Bahraini participation, and the Shah says he won't push his claim if he isn't challenged directly on it. But as the amirs organize, the challenge becomes clearer. The news of the FAA's latest meetings has led the Shah to consider the cancellation of a proposed November visit to Saudi Arabia. (You will remember that the Shah "postponed" his visit last January after a Saudi-Bahraini communique spoke of the "Arab character" of the Gulf.) The other territorial disagreement hasn't yet become a major problem, but could be as serious. Iran claims some islands in Hormuz Strait (the Tunbs and Abu Musa) which leads from the Gulf to the Arabian Sea. As long as the British held the Islands, the Shah was content to let the claim lie dormant. He is now afraid that if the Arabs get the islands, it will only be a matter of time before Nasser establishes a naval base there and blockades Iran. His fears may be groundless, but for him this is a real danger. Hopefully, the Shah and Faisal will let their common interest overcome minor territorial disputes, but it won't be easy. Our policy is to stay out of the middle but to keep reminding both of them that the best way to keep Nasser and the Russians out is to work together. State has been back and forth over this problem and decided that our main effort should be gradually to expand our representation in the Gulf to make our views heard but generally not to think in terms of major US programs. John
286. Action Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/" Washington, May 22, 1968. /1/Source: Johnson Library, National Security File, Memos to the President, Walt W. Rostow, Vol. 78, May 20-24," 1968. Confidential. SUBJECT You asked whether we could have a big dinner for the Shah to which he might bring his wife, instead of the small working luncheon we had planned for him on June 12. Both your schedule and the Shah's would permit our having a large dinner on June 11. Everyone here and at State feels that, from the foreign policy viewpoint, this would be a good thing to do. The only reason we had not suggested it before was that the Shah had been here on an official visit just last August and, since he is coming this time on a private visit to receive an honorary degree, we did not want to impose on you for another dinner. However, if you would like to have him, we would all be delighted. We cannot be sure that his wife could come. She has decided not to accompany him on this trip. However, she will just have been to Ethiopia with him, will come as far as Europe with him and then will go on to Morocco with him after his visit here. The Shah has never told us exactly why she did not wish to come here, but we believe that her unpleasant experiences with demonstrating students in Berlin on a previous trip may have made her wary of coming here, where Iranian students usually demonstrate against the Shah when he comes. She might reconsider and come just for the White House part of the trip, but we cannot guarantee this. If you would like to invite the Shah to dinner on June 11 in hopes that the Empress can come too, we would propose the attached message/2/ from you suggesting this change in plans and making a special point of your wish to entertain the Empress before you leave the White House. /2/Attached but not printed. If you wish to wrap this all up in one day, we could reschedule the office visit to 5:30 P.M. on June 11. If not, we would leave it scheduled for 12:30 P.M. on June 12. Once we have your preference and the Shah's acceptance, we will work out the announcement with George Christian. W.W. Rostow/3/ /3/Printed from a copy that bears this typed signature.
Approve dinner Tuesday, June 11, with office meeting at 5:30 P.M. same day Approve dinner Tuesday, June 11, with office meeting at 12:30 P.M. the next day/4/ Leave schedule as is with office meeting at 12:30 P.M. Wednesday, June 12, followed by small working lunch /4/This option is checked.
287. Telegram From the Department of State to the Embassy in Iran/1/ Washington, May 22, 1968, 0031Z. /1/Source: Department of State, Central Files, DEF 19-8 US-IRAN. Secret; Priority; Limdis. Drafted by Eliot on May 21 and approved by Battle. Repeated to CINCSTRIKE. 168328. Subject: Iranian Arms Program. 1. Assistant Secretary Battle briefed Iranian Ambassador Ansary May 21 on our arms program for Iran, stressing that briefing was for Ambassador's background as Ambassador Meyer had made formal presentation to Shah. 2. Battle also briefed Ansary on Congressional consultations on arms program. He said that two principal areas of Congressional interest were Iranian-Soviet relationship and Iran's relations with its Arab neighbors. He said he had indicated to Senate Foreign Relations Subcommittee that Shah is well aware of Soviet aims and that although there are frictions in Gulf, we believe our arms program for Iran will assist area stability. Battle also said there had been questions about nature of military threat to Iran. He stressed that atmosphere of consultations had been very good and that there is warm feeling for Iran and Shah on Capitol Hill. 3. In discussing Congressional consultations, Battle indicated there may be some Congressional repercussions as result forthcoming Soviet fleet visit to Iran. 4. Battle also mentioned that New York Times has apparently acquired from Congressional sources information on our proposed arms program. He said it is likely story will appear May 22. 5. Only point Ansary raised on arms program was Shah's disappointment with $75 million limitation this fiscal year. Battle indicated that as Ambassador Meyer had told Shah we are trying to find additional funds. Rusk
288. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, May 28, 1968, 1345Z. /1/Source: Department of State, Central Files, POL 7 U.S.S.R. Confidential; Limdis. Repeated to CINCSTRIKE and Moscow. 5007. Ref: Tehran 4993./2/ Subj: Soviet Military Equipment Offers. /2/Dated May 28. (Ibid.) 1. Shah informed ARMISH/MAAG Chief Jablonsky that Zakharov (returned USSR May 27 after 10-day visit in Iran) had offered wide variety military supplies with early delivery. Specifically Zakharov offered destroyers, submarines, missile boats and MIG-21s. MIG-21 price of $700,000 quoted and Zakharov reportedly pointed out contrast with price of $3 million for U.S. sale of F-104's to West Germany. When Jablonsky commented there was no requirement for such equipment, Shah replied "I agree and it will not happen unless you help them" (alluding we suppose to possible U.S. failure to satisfy his requirements). 2. In separate conversation Jablonsky had earlier with General Toufanian latter disclosed Zakharov had also offered 200-300 spaces in Soviet military academy for Iranians, plus accommodation 15-25 in war college and 200-300 in infantry, artillery and armored schools. Toufanian rejected offer, but confirmed IIA sending 12 trainees to Soviet Union for six months' training. Russians told Toufanian they still not prepared to sell Iran radar-guides 23 mm. anti-aircraft weapons. Thacher
289. Telegram From the Embassy in Iran to the Department of State/1/ Tehran, May 29, 1968, 0830Z. /1/Source: Department of State, Central Files, POL 7 IRAN. Confidential; Priority; Exdis. 5016. Subj: Shah's Visit. Ref: State 172125./2/ /2/Telegram 172125 to Tehran, May 28, reported that Ansary had relayed a message from the Shah accepting the invitation and conveying the Empress' regrets. (Ibid.) 1. Alam informs me Shah is quite agreeable to dinner on June 11 in place of lunch June 12. 2. Ansary has apparently succeeded in stirring up a lot of concern here about possible threat to Shah's personal safety, at Harvard ceremony. According to Alam, Ansary has been to Cambridge and personally walked through the proposed proceedings. These would require Shah pass in procession down a street lined with buildings where students live and to be in very exposed position at ceremonies themselves. FBI, Alam says, believes it very difficult provide proper security measures. I said I was sure Department studying problem very thoroughly and would take every possible precaution. Alam himself leaves June 1 to arrive in U.S. June 3 and plans visit both Washington and Cambridge for personal study of situation. Department will wish no doubt do whatever it can calm Ansary's fears. Alam informed me also there has been leak here re Harvard ceremony. Peigham-Emruz, left-leaning small circulation Persian daily, ran story afternoon May 28 referring to a ceremony to be held at Harvard shortly honoring the Shah. No date given. Alam has instructed press here give no further circulation to report and wire service reps also told not to run it. Alam acknowledged leak had occurred at Pahlavi University where Shah's speech sent for translation. Thacher [Continue with the next documents] |
