Foreign Relations of the United States, 1964–1968, Volume XXII, Iran

273. Telegram From the Embassy in Iran to the Department of State¹

Tehran, March 23, 1968, 0850Z.

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.

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

1. Source: Department of State, Central Files, DEF 19–8 US–IRAN. Secret; Priority; Limdis.
2. Document 271.