264. Telegram From the Embassy in Iran to the Department of State0

1425. Department pass Defense.

While we can not read Shah’s mind, we have tended believe Shah’s motive in entering negotiations with USSR was primarily blackmail for more US aid and resentment against what he believes to have been US niggardliness and unfairness over years re aid. British, Paks, and to lesser extent Turks seem to believe him to be making a genuine effort to improve Iran’s international position vis-à-vis USSR. Possible Shah is rationalizing first motive to second one, and is being convinced by his rationalization.
Signing this agreement with Soviets could probably be stopped by (A) substitution of territorial guarantee or treaty alliance for bilateral now under negotiation, or (B) provisions sufficient 1338 budgetary aid to satisfy Shah (probably absolute minimum dollars seventy million) to be topped off by showy offer of rockets, destroyers, or other hardware. Other and less promising possibility Shah will take fright at last moment in negotiations with Soviets, that Soviets will overplay their hand, or that Shah may be affected by cogent arguments re consequences flirting with USSR.
Course (A) above involves global policy considerations and domestic political factors on which Embassy can not comment; it assumes that such action would not be possible at present. Course (B) would be easiest for Embassy to recommend. However, repeated experiences with such appeasement show that its adoption and execution would foreordain another, and probably more serious, crisis, within one year at most. Shah’s appetite for soldiers and military hardware is unrealistically unlimited; next year would see more insolent demands and threats uttered with greater assurance and greater danger to Free World. Embassy believes primary dangers to Shah’s regime are internal, not external, and that useless military expenditures weaken rather than strengthen it. Adoption course (B) would only exacerbate basic problem.
Consider campaign of political and subversive action to bring local pressure on Shah to change his mind or reduce him to figurehead can not become effective in time to stop him.
Core of problem lies in Shah’s insatiable appetite to expand his army (at least to size, quality, and equipment level of Turkish Army) and his continuing misconception US role in that operation. BP has [Page 631] meant nothing to people or Gov Iran other than strong hope of massive aid and/or territorial guarantee from US in return for Iranian adherence pact. Shah has chosen to believe US promised him unlimited aid upon his adherence to pact and that US has renewed that promise every time it has promised to study his requests. Latest renewal blank check, in eyes of Shah, was July 19 letter.1 Shah and Hekmat have still not told GOI financial people of our aid offer and have not, therefore, given latter chance to say, as they well might, that GOI could live with this offer. Shah’s hopes and wishful thinking re US aid nourish his dreams of military glory, and vice versa. Removal of these misunderstandings once and for all would appear to be desirable even if Shah were to suffer disappointment in process.
Embassy recommends US act as follows to counter Shah’s threat:
Loan and carry out with BP members coordinated bombardment Shah with arguments designed show how agreement with Soviets would endanger Iran and embarrass Free World—this would be of only minor effect on Shah.
Offer to meet half of budgetary deficit if it is reduced to acceptable level (reducing to dollars seventy million deficit is certainly feasible, and, as per Embtel 1415,2 dollars 28.6 million is justified by military budget review and balance justifiable as meeting collateral economic costs of build-up).
Private and personal letter from President to Shah (should be cabled) saying, in effect, that President understood Shah was troubled by present US attitude on aid and bilateral agreements and would like to hear first hand from Shah what was on his mind. President’s letter would add that he was asking me to deliver and to say that I was being asked to transmit Shah’s response direct to President by fastest confidential means. This procedure should appeal to Shah as providing direct communication with highest US official and at same time play for time in event Shah should be inclined to take precipitate action and sign up with Soviets. At later stage, depending on course of developments, it might be desirable if personal representative of President were able to come to Tehran to talk to Shah. I would not, however, recommend this visit right now but would prefer first to see how matters develop following an exchange of correspondence between President and Shah.
Embassy gives course action outlined above no more than reasonably good chance of stopping Shah. If Shah goes through with agreement with Soviets, Embassy urges Department to minimize in every way possible the disadvantageous domestic reactions in US, to present a front of serenity and undiminished confidence in Shah’s good faith and ability preserve Iranian independence. Impression that US believes Iran [Page 632] is lost to Free World should be avoided at all costs, since such impression would play into hands of Soviets.3
  1. Source: Department of State, Central Files, 788.5–MSP/1–3059. Secret. Repeated to Ankara, Karachi, London, and Moscow.
  2. See Document 243.
  3. Dated January 28. (Department of State, Central Files, 788.5–MSP/1–2859)
  4. In telegram 1943 to Tehran, January 30, the Department of State expressed concern that the Shah might now seriously consider signing a treaty with the Soviet Union. The Department of State suggested the following course of action:

    “In our reaction we should avoid either a) showing undue alarm and giving undertakings which would disclose to Shah and others that these tactics with US will pay off, or b) remaining apparently unconcerned to extent Shah would feel we regard his position as bluff with result that he had no alternative but to carry out threat. There is also possibility that Shah might naively believe non-aggression treaty with Soviet Union would give him some added security. We therefore have come to conclusion similar that reported Embtel 1425 that message to Shah might be useful at this stage.” (Ibid., 788.5–MSP/1–3059)