191. Telegram From the Embassy in Iran to the Department of State1
Tehran, April 29, 1967,
1135Z.
4261. Subj: Annual Review. Ref: Tehran 4253;2 A–578; A–580.3 Dept pass DOD for ISA.
1. Following is summary principal conclusions and recommendations contained in Embassy’s A–580 on broad political-military-economic aspects of FY 68 increment US military sales program for Iran:
- A.
- As result last year’s extensive review Iran’s military requirements for next four years, discussions FY 68 tranche can be conducted within much narrower framework. Although Iranians fully understand each annual $50m tranche of USG military credit requires specific Presidential approval after joint US-Iranian review Iran’s economic prospects, Shah and his military advisors planning on assumption U.S. will meet commitment given fall of 1966 to supply Iran with two squadrons (32) F–4 aircraft.
- B.
- Iran’s friendship is of tangible worth to U.S. Iran is oasis of success in ME and provides evidence that close collaboration with US can produce stability, progress, and reform, as well as commendable desire to command one’s own destiny. Shah has given quiet support to CENTO, has warned Pakistan against too close association with ChiComs, and has sought to act as moderating influence against Pak extremism. Iran’s aid to Vietnam is unique in ME and its friendship and cooperation permit refueling stops and overflights for endless stream US military aircraft. Most important of all, Iran provides base for variety U.S. special facilities vital to U.S. security.
- C.
- These valuable assets require continued U.S. support. With U.S.-GOI relationship in “transitional” phase as result growing Iranian prosperity and steady elimination U.S. economic and military assistance, much depends on US response in major dynamic area our relationship—military sales—on which Shah focuses as barometer U.S. intentions.
- D.
- GOI purchases military equipment from other than U.S. sources (e.g., U.S.S.R., U.K.) have been generally consistent with US understanding Shah’s intentions at time four-year sales program evolved. Shah still deeply concerned over his exposure to destructive surprise attack on his vital industrial and oil installations in south and elsewhere in border areas where his two most important air bases are located. Iranian fears keyed largely to what they regard as U.K. intention to withdraw from Persian Gulf area and immutable UAR objective to obtain by whatever means control over all ME oil wealth. Reinforcing these apprehensions is concern over unfavorable balance in Iran’s military power compared with that of its Arab neighbors. Iran remains concerned with Soviet threat and considers Nasser as prime Soviet instrument in ME.
- E.
- Shah still welcomes advice on technical matters but vigorously rejects efforts to challenge his estimate fundamental dangers he faces. To be effective U.S. advice must take into account Iranian sensibilities and Shah’s own security estimates. Shah continues to rely on U.S. for sophisticated and sensitive weaponry. However, if US not prepared to provide defensive arms as “insurance” for his rich border region, Shah will surely acquire them elsewhere, a move which would have enormous impact on U.S. military presence in Iran.
- F.
- Iran, now in its third year of rapid economic growth under circumstances of impressive price stability, has demonstrated its capacity to maintain momentum of rapid economic development while meeting its economic problems. Economic outlook for Iran presents no reasons for refusing further credit to Iran. Rather it demonstrates constructive role such credit, at long terms and low rates, can play in Iran’s future.
- G.
- In up-coming credit negotiations GOI will emphasize GOI’s needs for maximum stretch-out repayment dates and minimum interest costs. Iranians will also be mindful of their accommodating response to [Page 359] U.S. requests for forbearance re purchases of gold for dollars as well as 2–1/2 percent interest rate and over 10-year repayment period offered by U.S.S.R. U.S. will not be expected to meet Soviet credit terms but to present tangible proof it values Iranian friendship.
- H.
- It is recommended that: (1) U.S. extend $50m credit for purchase of arms; (2) U.S. agree to sell Iran second F–4 squadron at most reasonable prices possible; (3) we attempt to conclude negotiations on note of general cordiality and satisfaction; (4) we provide concessional interest rate of not higher than 4–1/2 percent; rate higher than 5 percent unquestionably would deprive U.S. of psychological and perhaps political advantage we can otherwise reasonably expect; and (5) we give careful consideration to possibility extending payment period to full 10 years; in no case, however, should payment period be less than eight years.
Meyer