241. Telegram From the Embassy in Iran to the Department of State1
1965. 1. Today’s Wireless Bulletin reports Senate-House conferees have finally reached agreement on foreign aid legislation. Report says conferees agreed Defense Department’s overseas arms sales program should end next June 30.
2. As Dept knows, military credit sales issue is key factor in our current relationship with Iran. President promised Shah in August that administration continues desire supply equipment to Iran but definitive determination depended on Congressional deliberations then taking place.
3. Since my return, Shah has three times stated he is awaiting conclusion of Congressional deliberations. He made clear his strong desire to maintain American orientation his military establishment but if there is uncertainty he will purchase elsewhere.
4. Having provided Iran with most of its military establishment via grant aid, Shah cannot understand USG’s unwillingness to provide arms via credit sales now that Iran is in position to pay. Acquiring arms from elsewhere increases costs and decreases efficiency of Iran’s military establishment. Thus Shah’s incomprehension tends toward resentment.
5. Realize it may be difficult to sort out where conference committee agreement leaves us as far as arms sales to Iran are concerned. However, we need to have as soon as possible position to take with Shah.
6. Was there any hope that by June 30, 1968 other avenues might be devised which would permit credit sales to Iran on terms not too unattractive? Would language of legislation permit credit sales to Iran if we determine that Iran is not an underdeveloped country, a determination [Page 436] USG has already made as far as imposing interest equalization tax is concerned? Are there avenues other than that which Congress is terminating as of June 30, 1968 which might be opened for maintaining our relationship with Iran?
7. Needless to say, our first reaction here is that Congress has dealt a crippling blow to our relations with Iran. Tragically, it comes at a time when after Shah’s Washington visit and Iran’s own remarkable progress relations between our two countries are at a high. Blow also comes at time when it seems to us USG should be preserving friendships with countries like Iran. Aside from friendship, we have at stake number of facilities vital to our national security.
8. Since this is number one problem for Iran and since Shah raised it with President, Dept should not rule out possibility of direct message from President to Shah explaining state of play. Hopefully message could contain some assurance that all hope is not lost for continuing mutually beneficial military cooperation between our two countries.
- Source: Department of State, Central Files, DEF 19–8 US–IRAN. Confidential; Priority. Repeated to CINCMEAFSA/CINCSTRIKE.↩